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Islamabad: The federal government has decided to base the budget 2024-25 on an exchange rate of Rs. 295/$, sources within the Finance Ministry revealed.
This move represents a Rs. 10 increase from the current fiscal year’s rate of Rs. 285/$. The decision is seen as a bid to prevent a sharp exchange rate depreciation in FY2024-25, amid fears of market instability.
The increased dollar rate is likely to contribute to higher inflation in the next fiscal year, but it may also boost foreign exchange earnings due to increased demand for Pakistani products globally.
However, the depreciation of the rupee will impact development spending on foreign currency and petroleum products, making imports more expensive. The trade deficit is expected to decrease significantly due to reduced demand for pricey imports.
The estimated dollar rate will be used to calculate foreign aid, payments, and loans in rupees, contradicting Finance Minister Muhammad Aurangzeb’s previous statement of a stable rupee.
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The market-based exchange rate is part of the agreement with the International Monetary Fund (IMF). The higher dollar rate may lead to increased external debt, import bills, and prices of imported food items.
The new budget exchange rate may reflect the expected value of the rupee in the coming months, potentially helping authorities reach a staff-level agreement with the IMF on a new bailout.