KARACHI: Pakistan’s currency has shown unexpected resilience during the Iran war, appreciating about 0.3 percent against the US dollar since late February, according to State Bank of Pakistan (SBP) data, with analysts attributing the stability largely to financial inflows from Saudi Arabia.
The stability is unusual given Pakistan’s fragile external position and has been supported by external inflows and steady remittances, helping offset pressures from inflation, energy imports and risks to shipping routes through the Strait of Hormuz.
The rupee strengthened to Rs278.77 per dollar on Apr. 30 from Rs279.47 on Feb. 27, a day before the Iran war began, as the US dollar weakened against global peers during the same period.
“During the war Pakistan’s rupee remained stable partly because of healthy foreign inflows driven primarily by Saudi Arabia,” said Sana Tawfik, head of research at Karachi-based brokerage Arif Habib Limited.
Pakistan last month secured $3 billion in fresh deposits from the Kingdom along with a rollover of $5 billion in existing support, providing what Finance Adviser Khurram Schehzad described as “significant room for the country’s externals” in a social media post.
Another $750 million was raised through a Eurobond issuance, marking Pakistan’s return to international capital markets after a four-year gap.
Tawfik said these inflows helped offset major outflows, including a $3.45 billion repayment to the Abu Dhabi Fund for Development on Apr. 23 and settlement of a $1.43 billion international bond earlier in the month.
“Without the Saudi support, Pakistan’s foreign exchange reserves would have dropped significantly and that was bound to weigh on the rupee-dollar parity,” she added.
Pakistan’s foreign exchange reserves currently stand at $21.3 billion, including $15.8 billion held by the central bank.
The currency’s relative stability also reflects broader external buffers, including remittances, which rose 8.2 percent to $30.3 billion during July-March in the ongoing fiscal year (FY26), according to finance ministry data. Saudi Arabia and the UAE accounted for the largest shares of inflows.
“The government has proactively raised external financing via enhanced bilateral arrangements and issuance of Eurobonds, which cushioned the impact of the recent debt and liability repayments on SBP’s FX reserves,” the central bank said in its latest monetary policy statement.
Still, analysts cautioned that the gains may not hold without sustained inflows and structural reforms, though some say the currency has held up better than expected.
“The rupee is currently surprising markets with stability and modest strength despite macroeconomic headwinds,” said Muhammad Waqas Ghani, head of research at JS Global Capital Ltd.
Views on the currency’s trajectory remain divided.
Malik Bostan, chairman of the Exchange Companies Association of Pakistan, said the rupee could strengthen further against the dollar if the central bank reduced its dollar purchases.
“The State Bank is boosting its reserves through buying dollars from the interbank market,” he said. “The dollar will fall more. The next target is Rs275. Then Rs250.”
Data from JS Global Capital show SBP’s dollar purchases rose sharply, increasing 373 percent year-on-year to $728 million in January, with total purchases reaching $4.9 billion during July-January FY26.
Ghani, however, expects a more moderate path.
“By June 2027, expect the rupee at 285-288, a modest 2-3 percent depreciation from current levels as SBP gradually steps back and the currency finds its fair value in case of persistent stagflation,” he said.
Ali Akber, an investment analyst at Arif Habib Ltd, also expects a limited adjustment, projecting the rupee in the 290–292 range by mid-2027.
“However, the outlook will depend on broader geopolitical developments, external inflows and outflows and the current account situation,” he said.
Officials at the State Bank of Pakistan and the finance ministry did not respond to requests for comment.
