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USD/PKR forecast: Will Pakistan’s rupee continue to fall?


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Portrait of Mohammad Ali Jinnah on a 1000 PKR banknote
Will Pakistan’s rupee continue to decline? – Photo: Bloomberg Creative Photos / Gettyimages

The Pakistani rupee (PKR) has continued on a downward spiral against the US dollar (USD) after a brief rebound in August.

As of 19 September, the rupee has erased its gains made in August and early September to trade around the 240 level – the mark hit on 28 July. The currency hit a record low in late July, when it experienced its worst weekly fall since 1998 as a consequence of a shortage in foreign currency reserves, slowing economic growth and political instability.

PKR remains down by around 30% since the start of the year, as the strength of the greenback has created a challenging environment for emerging markets currencies. 

What drives the value of the currencies and what is the outlook for the rupee? In this article, we look at the performance of the Pakistani rupee against the US dollar, as well as the latest USD/PKR predictions and forecasts. 

What drives the USD/PKR exchange rate?

In forex trading, the US dollar/Pakistan rupee (USD/PKR) currency pair represents how much of the quote currency – the rupee – is needed to buy one unit of the base currency – the US dollar. The number of rupees needed to buy one dollar reached a record high of 240.15 on 28 July.

The value of a currency tends to be driven by the issuing nation’s economic growth, monetary policy (such as interest rates), and cross-border trade balance. These all determine the country’s attractiveness as an investment destination and the potential for the national currency to rise in value.

Pakistan is a consumption-based economy, relying on imports of commodities such as plastic, steel and chemicals for its manufacturing industry. The country’s imports have soared in the post-pandemic recovery. The trade deficit widened by 55.7% in the year to June 2022 in dollar terms as imports grew by 24%, according to data from Pakistan’s Bureau of Statistics. That has increased its demand for dollars and weakened the value of the rupee.

As the world’s reserve currency, the value of the US dollar is driven by sentiment on the global economy as well as economic activity in the US. The dollar acts as a safe haven for investors during times of economic and geopolitical uncertainty, which has been evident in 2022 as the greenback has soared in value to 20-year highs against a basket of other currencies. Monetary policy on using higher interest rates to combat soaring inflation has also been a key driver for the dollar, with a series of interest rate hikes making the dollar more attractive for investors.

Historical USD/PKR performance

The Pakistani rupee has been in a long-term decline against the US dollar since the start of 2018 when it traded around the 110 level. The country has faced ballooning current and fiscal account deficits and repeated devaluations of the currency, which shifted from a managed rate against the US dollar to a free-floating exchange rate in 2018.

USD/PKR Exchange Rate, 2017-2022

By the start of 2019, the US Dollar/Pakistani rupee rate was trading around 140. It weakened over the summer to a record above 163, ending the year around 155. By the end of 2020, the rupee was trading at 160, with the Covid-19 pandemic driving up the value of the dollar. 

The devaluation of the rupee accelerated in the second half of 2021, with the USD/PKR exchange rate breaching the 200 level for the first time in May 2021, ending the year at 176.20. Local media reports indicated that $2m in dollars had been taken across the border from Pakistan into Afghanistan daily following the US withdrawal in August 2021 and the collapse of the Afghan banking system, contributing to a shortage of dollars in Pakistan. 

PKR accelerates slide against USD in 2022 

Pakistan’s foreign currency reserves have been eroded further in 2022 as the country’s central bank, the State Bank of Pakistan (SBP), has been using reserves to slow currency depreciation. 

The USD/PKR pair traded between 176 and 182 in the first quarter but began to slump in April, when Prime Minister Imran Khan was ousted in a no-confidence vote and the government collapsed. Currency dealers were also concerned that the International Monetary Fund (IMF) would halt its lending to the country while a new government was formed. In a statement in late April, the IMF said that it would conduct a field mission in May “to resume discussions over policies for completing the 7th EFF review” under its Extended Fund Facility (EFF) program.

In a statement on 1 September 2022, the IMF said that it had completed the combined 7th and 8th reviews of Pakistan’s EFF, making $1.177bn available to the local authorities. According to the international financial institution:

“Pakistan is at a challenging economic juncture. A difficult external environment combined with procyclical domestic policies fueled domestic demand to unsustainable levels. The resultant economic overheating led to large fiscal and external deficits in FY22, contributed to rising inflation, and eroded reserve buffers.” 

To stabilise the economy and bring policies into line with the IMF’s requirements, Pakistan is expected to implement its financial year 2023 budget to reduce government borrowing, resume power-sector reforms, use monetary policy to bring down inflation from June’s 20% level, strengthen the social safety net to reduce poverty and strengthen governance. 

On 18 July, Fitch Ratings revised its outlook for Pakistan to reflect “significant deterioration in Pakistan’s external liquidity position and financing conditions since early 2022. We assume IMF board approval of Pakistan’s new staff-level agreement with the IMF, but see considerable risks to its implementation and to continued access to financing after the programme’s expiry in June 2023 in a tough economic and political climate.

“Renewed political volatility cannot be excluded and could undermine the authorities' fiscal and external adjustment, as happened in early 2022 and 2018, particularly in the current environment of slowing growth and high inflation,” Fitch said, citing Khan’s organising of large-scale protests around the country and calls for early elections. 

“The new government is supported by a disparate coalition of parties with only a slim majority in parliament. Regular elections are due in October 2023, creating the risk of policy slippage after the conclusion of the IMF programme.”

Fitch noted that SBP’s liquid net foreign exchange reserves declined to about $10bn, equivalent to just one month of current external payments by June 2022, down from about $16bn in June 2021. 

Fitch estimated that the country’s current account deficit (CAD) reached $17bn, or 4.6% of gross domestic product (GDP), in the financial year ended June 2022, “driven by soaring global oil prices and a rise in non-oil imports boosted by strong private consumption. Fiscal tightening, higher interest rates, measures to limit energy consumption and imports underpin our forecast of a narrowing CAD to USD10 billion (2.6% of GDP) in FY23.” 

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Fitch forecasts that Pakistan’s GDP growth could slow to 3.5% in the 2023 financial year, from 6% the previous year, because of “fiscal and monetary tightening, high imported inflation, and a weaker external demand outlook, all of which will also hit household and business confidence”.

In its meeting on 7 July, the SBP’s Monetary Policy Committee (MPC) decided to raise its headline interest rate by 125 basis points to 15% and linked the interest rates for Export Finance Scheme (EFS) and Long-Term Financing Facility (LTFF) loans to the policy rate to strengthen monetary policy transmission, while incentivising exports by offering a 500 basis point discount to the policy rate for exports. 

“This combined action continues the monetary tightening underway since last September, which is aimed at ensuring a soft landing of the economy amid an exceptionally challenging and uncertain global environment. It should help cool economic activity, prevent a de-anchoring of inflation expectations and provide support to the Rupee in the wake of multi-year high inflation and record imports,” the committee said in a statement. 

The MPC noted “three encouraging developments” since the last meeting. An “unsustainable” energy subsidy package was reversed and the government passed its fiscal year 2023 budget that paved the way for completion of the IMF review. Pakistan received a $2.3bn commercial loan from China to help support FX reserves. And economic activity continues to grow.

But central banks around the world responding to multi-decade highs in inflation with aggressive interest rate rises is leading to downward pressure on most emerging market currencies, the MPC noted. And as the domestic energy subsidies were reversed, inflation in Pakistan rose to a 14-year high, the current account deficit unexpectedly spiked in May and the trade deficit widened to a seven-month high in June, on rising energy imports. 

“As a result, FX reserves and the Rupee remained under pressure, further worsening the inflation outlook.”

On 31 July, the SBP and the country’s finance ministry issued a rare joint statement calling the rupee’s depreciation “temporary”, adding that “going forward, as the current account deficit is curtailed and sentiment improves, we fully expect the Rupee to appreciate.”

The rupee found some relief heading into August, as Pakistan’s trade data for July showed that the country imported $4.86bn worth of goods, down by 38.31% from a record high of $7.9bn in June and down by 12.81% from July 2021. That allowed more dollars to stay in the country.

With the dollar weakening somewhat after the Dollar Index (DXY) retreated from a high on 14 July, the rupee appreciated against USD, with the USD/PKR pair moving as low as 217.15 on 11 August before moving back above 221.55 intraday.

The rupee has since lost all the gains made against USD in August and early September, as expectations of an aggressive Federal Reserve (Fed) continue to drive the US dollar further upwards. The DXY updated a fresh 20-year-high on 7 September, hitting the 110.51 mark, and is trading around 109.7 as of 19 September.

What is the outlook for the US Dollar/Pakistani rupee exchange rate in the current environment? 

Read on for the USD/PKR forecast analysis.

USD/PKR forecast: will the rupee continue to weaken?

Analysts at Fitch Solutions expect the SBP to continue its interest rate hikes “to rein in import demand to slow the decline of FX reserves”. The analysts also suggest that the results of a recent by-election by the opposition will place greater pressure on the government to hold an early general election. 

“While an early election would reduce political uncertainty, it could also derail the IMF Extended Fund Facility (EFF) programme if the new government backtracks on fiscal reforms.”

At the time of writing, analysis by TradingEconomics showed a USD/PKR forecast of 242.06 by the end of this quarter, with the rupee weakening further and the exchange moving to 253.88 in 12 months’ time, based on global macro models and analysts’ expectations. 

Algorithm-based services issued varying USD/PKR forecasts – some showed a weaker rupee against the dollar in the coming years.

As of 19 September, WalletInvestor’s USD/PKR forecast for 2022 showed the pair trading at 230.441 by the end of the year and 244.448 by the end of 2023. The site’s USD/PKR forecast for 2025 showed the pair trading at a new high of 272.601 by the end of the year.

Gov.Capital’s USD/PKR forecast for 2022 showed the pair trading at 226.571 by the end of the year and 733.776 by the end of 2025, subsequently crossing the 900 mark in September 2026.

Analysts and algorithm-based forecast platforms have yet to issue a USD/PKR forecast for 2030.

When considering any USD/PKR forecast, it’s important to remember that currency markets are highly volatile, making it difficult for analysts and algorithm-based forecasters to come up with accurate long-term predictions. 

We recommend that you always conduct your own research, looking at the latest news, technical and fundamental analysis, and analyst commentary before trading. Keep in mind that past performance is no guarantee of future returns, and never trade money you cannot afford to lose.


Why has USD/PKR been dropping?

The USD/PKR rate reached a record high of 240.15 in late July, and has since returned to that level, as Pakistan is dealing with dwindling foreign exchange reserves, political instability, high inflation and a widening trade deficit. The PKR appreciated briefly in August amid a fall in imports and a weakening of the US dollar.

Will USD/PKR go up or down?

At the time of writing, analysts and forecasters indicated that the value of the US dollar could continue rising against the Pakistani rupee, but the direction of the exchange rate will likely depend on economic activity and monetary policy in both the US and Pakistan, as well as the outcome of elections in Pakistan, among other factors.

When is the best time to trade USD/PKR?

Technically, you can trade currency pairs, including USD/PKR, around-the-clock. However, there are certain time slots when forex trading is most busy. This usually occurs between 08:00-12:00 ET, when US economic data is typically released. Whenever significant macroeconomic data is released or new central bank policies are unveiled, the USD/PKR pair’s volatility often tends to increase.

However, you should make trading decisions after performing your own research and remember that high volatility increases risks of losses.

Keep in mind that past performance is no guarantee of future returns. And never invest money you cannot afford to lose.

Is USD/PKR a buy, sell or hold?

Whether you should trade the USD/PKR pair and the position you take is a personal decision depending on your risk tolerance and investing strategy. You should do your own research into the economic data, government policies and other factors that drive the exchange rate to make an informed decision. Keep in mind that past performance is no guarantee of future returns. And never invest money you cannot afford to lose.

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