The Pakistani rupee (PKR) is artificially undervalued, with its fair value estimated at 249.2 against the US dollar, according to the latest economic outlook from Tola Associates, published by Business Recorder. Currently, the market rate hovers around 249.9 PKR/USD, while the official inter-bank rate stands at 282.2 PKR/USD.
The report analyzed four potential scenarios for the rupee’s valuation, including the status as of June 30, 2024, the actual current account deficit (CAD) of $665 million for FY24, the government’s projected CAD at 0.9% of GDP, and an adjusted CAD estimate for the July-April period of FY25.
Tola Associates also highlighted the inflationary impact of currency depreciation, noting that a 10-rupee decline in the rupee’s value results in a 2% increase in inflation, and vice versa.
Despite recent improvements — with inflation falling sharply from 29.7% in November 2023 to 0.3% in April 2025 — the outlook remains fragile. Inflation risks persist due to possible fiscal adjustments, rising food prices, and increasing global commodity costs.
The Monetary Policy Committee has affirmed that the current policy stance is appropriate to keep inflation within the target range.
Key sectors such as agriculture, manufacturing, and IT are driving export-led growth, while the report stresses the importance of effective public financial management, particularly controlling expenditures and boosting revenue.
Overall, the outlook expresses cautious optimism, underscoring the need for ongoing economic reforms to manage inflation pressures and sustain stable growth.