By Moaaz Manzoor

The Pakistani rupee remained broadly stable against major international currencies during May 2026, posting a modest appreciation against the US dollar amid improving foreign exchange reserves and steady market sentiment.

According to the State Bank of Pakistan’s (SBP) weighted average customer exchange rates, the US dollar stood at Rs278.5019 for buying and Rs278.9270 for selling on May 4. By the end of the first week on May 8, the rates had eased to Rs278.4300 and Rs278.8551, respectively.

The rupee continued to strengthen gradually during the month. By May 15, the dollar had declined to Rs278.3386 for buying and Rs278.7637 for selling, while on May 22 it stood at Rs278.2463 and Rs278.6714. The greenback closed the month on May 29 at Rs278.2235 for buying and Rs278.6486 for selling, reflecting a slight appreciation of the rupee over the period.

The euro also recorded limited movement. It opened at Rs326.6799 for buying and Rs327.1676 for selling on May 4, edged up slightly during the first week, and then softened during the remainder of the month. By May 29, it stood at Rs323.9556 for buying and Rs324.4528 for selling.

The British pound followed a similar trend. It opened at Rs378.4040 for buying and Rs378.9892 for selling on May 4 and declined to Rs373.8372 and Rs374.4319, respectively, by the end of the month.

Among other major currencies, the Saudi riyal remained largely stable, moving from Rs74.2519 for buying and Rs74.3601 for selling at the beginning of the month to Rs74.1408 and Rs74.2490 by May 29.

The Chinese yuan strengthened during the month, rising from Rs40.7904 for buying and Rs40.8426 for selling to Rs41.1039 and Rs41.1567, respectively. In contrast, the Japanese yen weakened from Rs1.7769 and Rs1.7795 to Rs1.7466 and Rs1.7492 over the same period.

The rupee’s stable performance came against a mixed macroeconomic backdrop. Consumer Price Index (CPI) inflation accelerated to 10.9 percent year-on-year in April 2026, the highest level since July 2024, compared with 7.3 percent in March.

At the same time, Pakistan’s economy recorded growth of 3.99 percent during the third quarter of FY26, supported largely by a 4.7 percent expansion in the industrial sector.

External sector indicators also provided support to market sentiment. Pakistan successfully issued its inaugural three-year Panda Bond worth $250 million in China at a coupon rate of 2.5 percent, with investor demand exceeding the offering by more than five times.

Meanwhile, the country’s liquid foreign exchange reserves increased to $22.65 billion as of May 22, 2026, helping strengthen confidence in the rupee and the broader external sector outlook.

However, external account pressures remain visible. Pakistan recorded a current account deficit of $252 million during the first 10 months of FY26, compared with a surplus of $1.662 billion during the same period last year. In April 2026 alone, the current account posted a deficit of $324 million, reversing the surplus of $1.134 billion recorded in March.

On the fiscal side, Pakistan’s budget deficit stood at Rs856 billion, or 0.7 percent of GDP, during the first nine months of FY26. Federal Board of Revenue (FBR) collections reached Rs9.306 trillion, reflecting a 10 percent year-on-year increase.

Industrial activity also showed encouraging signs. Large-Scale Manufacturing (LSM) output rose 11 percent year-on-year in March, although it declined 9.3 percent compared with the previous month.

Speaking with Wealth Pakistan, Syed Zafar Abbas, Manager at Zahid Latif Securities, said rising energy prices, core inflation and food inflation continue to affect household budgets and overall economic conditions.

He noted that inflation was increasing the cost of living, particularly for daily wage earners and lower-income groups.

“Pakistan’s rupee is stable, but until inflation and energy prices come down, pressure on ordinary people may continue,” Abbas said. He added that easing regional tensions could help improve sentiment further in the coming months.

Overall, the rupee’s performance in May reflected a relatively stable exchange-rate environment supported by stronger foreign exchange reserves and limited volatility in the dollar. However, inflationary pressures, energy costs and external account challenges remain key factors shaping the currency’s outlook in the months ahead.

Credit: INP-WealthPk