Tola Associates’ latest economic report reveals that the Pakistani rupee (PKR) is artificially undervalued. The fair value of the rupee, after analyzing the current account balance from July to April of FY25, is estimated at 249.2 PKR per US dollar. However, the rupee is currently trading at around 282.2 PKR/USD in the inter-bank market, signaling a gap between actual and fair value.
The report outlines four possible valuation scenarios for the rupee based on different current account deficit (CAD) figures, including last year’s actual deficit of $665 million and the government’s projections. It also warns that every 10-rupee drop in the rupee’s value causes inflation to rise by 2%, making currency stability crucial for controlling prices.
Despite notable progress in reducing inflation—from 29.7% in November 2023 to just 0.3% in April 2025—the report cautions that inflation risks remain. Rising food prices, global commodity costs, and potential fiscal policy shifts could push inflation upward again, requiring careful economic management.
Tola Associates points to agriculture, manufacturing, and the IT sector as key areas driving export-led growth. The report stresses the importance of effective public financial management, calling for tighter control of government spending and improved revenue collection to support sustainable economic growth.
Overall, the outlook remains cautiously optimistic, emphasizing the need for continued reforms to keep inflation in check and strengthen Pakistan’s economic resilience.