By News Desk 
Fitch Ratings has released a new outlook projecting that the Pakistani rupee will continue to weaken in a controlled manner over the next year. According to their forecast, the rupee could decline to Rs 285 per US dollar by June 2025, and further fall to Rs 295 per dollar by the end of fiscal year 2026.
This approach, according to Fitch, aligns with the monetary strategy of the State Bank of Pakistan (SBP) to manage rising economic activity and maintain foreign exchange reserves. Although a weaker rupee may raise import costs, it is expected to help reduce the trade deficit and strengthen reserve buffers in the long run.
The Rupee’s Journey and Economic Rationale
Back in September 2023, the rupee hit a historic low of Rs 307.10 per US dollar, triggered by a crackdown on illegal currency trading. However, by early 2024, it had appreciated to around Rs 277 per dollar, reflecting improved market conditions.
Despite the drawbacks of a weaker currency—such as increased import bills—Fitch emphasized that this move could contribute positively by lowering the trade imbalance and bolstering foreign reserves, especially in a recovering economy.
Economic Recovery and Reforms Fuel Optimism
Following a close call with sovereign default, Pakistan’s economy is showing signs of recovery. Declining global oil prices and renewed investor confidence have played a key role. The government, led by Prime Minister Shahbaz Sharif, has also secured critical funding tranches from the International Monetary Fund (IMF), enabling reforms to stay on track.
In light of these improvements, Fitch upgraded Pakistan’s sovereign credit rating, signaling a cautiously optimistic view of the country’s fiscal trajectory.
Concerns Over Foreign Reserves Remain
Despite positive developments, the State Bank of Pakistan Governor Jameel Ahmed recently disclosed that foreign exchange reserves dropped by $2 billion, bringing the total down to $10.6 billion, primarily due to repayments of foreign debt.
However, he expressed optimism, noting that the country is expecting an additional $4–5 billion from external sources before June 2025, which could raise reserves to around $14 billion—providing a cushion for future obligations.
Implications for Investors and Policymakers
Fitch’s forecast serves as an important indicator for investors, analysts, and economic decision-makers. It highlights Pakistan’s focus on monetary stability, foreign reserve sustainability, and structural economic reforms, even as the currency experiences controlled depreciation.
By gradually allowing the rupee to weaken, authorities are attempting to strike a balance between economic growth and financial stability—a strategy that could shape Pakistan’s economic landscape over the next few years.