Pakistan rupee vs UAE dirham, weaken more read why

Based on the report from the Institute of International Finance (IIF), it is expected that the Pakistani rupee will weaken further in the coming months. Pakistan rupee vs UAE dirham, weaken due to many reasons. The rupee, currently trading at around 288 against the US dollar (78.4 against the UAE dirham), is projected to fall to 317 against the US dollar (86.4 versus dirham) in 2024. The political turmoil in the country after the removal of the former government and high inflation rates have exacerbated the economic conditions.

Despite signing a loan agreement with the International Monetary Fund (IMF) and receiving financial support from Saudi Arabia and the UAE, the country may still face challenges in meeting its financing needs. Pakistan rupee vs UAE dirham, weaken due to many reasons. The rupee has already experienced substantial depreciation over the past two years, falling from 162 in July 2021 to around 295 in May 2023.
The IMF’s approval of a $3 billion loan and the deposit of $3 billion by Saudi Arabia and the UAE have boosted Pakistan’s foreign exchange reserves to around $8.7 billion, covering 1.6 months of imports. However, the nation heavily relies on remittances from its diaspora in the UAE, Saudi Arabia, Europe, and the US, and remittances have decreased to $27 billion in fiscal year 2023 compared to $31.3 billion in the previous year.

The IIF analysts view the additional financing from the IMF program and GCC deposits as beneficial in the short term, especially in light of the upcoming elections in mid-November. Market participants have reacted positively to this news, with Pakistan’s April 2024 bond rallying from around 50 cents on the dollar in late June to over 80 cents, and emerging markets bond index (EMBI) spreads narrowing from around 3,500bps to 1,900bps.

Despite these positive developments in the short term, the IIF remains cautious about Pakistan’s financing needs for the 2023-24 fiscal year. The country will have to carefully manage its economic challenges to stabilize the currency and improve its overall financial situation.

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