Investing wisely is vital for protecting your savings, increasing your income, and maintaining the buying power of your money over time. As the Pakistani rupee continues to lose value, it is essential to find a strong investment plan. One way to reduce the risks of the rupee's devaluation is to diversify your portfolio, especially by investing in more stable foreign currencies. In this article, we'll look at the best currency investment options in Pakistan to help investors protect and grow their wealth during these uncertain economic times.
Which Currency Is Best to Buy in Pakistan?
There is no question about why it is necessary to invest in Pakistan. But the question of which currency to invest in remains unanswered. There are many currency options where you can invest your PKRs to save value and hopefully also generate returns.
Before selecting the currency in which you should invest, make sure it is stable and has the potential to appreciate over time. The top three recommended currencies to invest Pakistani rupees in are:
- The US Dollar (USD)
- The Euro (EUR)
- The Swiss Franc (CHF)
Investment in United States Dollars (USD):
US Dollar Rate:
- 1 USD = 278.68 PKR (US Dollar to Pakistani Rupee) at 10:28am London time on 19th March 2024.
The US dollar is the world’s most traded currency. It also holds the status of the top reserve currency of the world. Being the currency of the highly developed economy of the United States, the USD is one of the most profitable currencies to invest in. More than 90% of all Forex transactions are in US Dollars.
Investment in the Euro (EUR):
European Euro Rate:
- 1 EUR = 302.14 PKR (Euro to Pakistani Rupee) at 10:28am London time on 19th March 2024.
The European Euro is known to be a high-value and stable currency. It is considered safe for investment and holds the status of the world’s second most popular reserve currency.
Investment in the Swiss Franc (CHF):
Swiss Franc Rates:
- 1 CHF = 313.55 PKR (Swiss Franc to Pakistani Rupee) at 10:28am London time on 19th March 2024.
Being a high-value currency, the Swiss Franc is also one of the best options for currency investment. It is stable and safe, supported by strong economic indicators such as a high GDP, a stable economy, and a highly advanced banking system.
Although you can invest in any of the above currencies, avoid investing all your savings in just one currency.
To be on the safe side and to diversify risk, invest in multiple currencies to hedge loss from one currency with the profit of another.
Why Is It Important to Hedge PKR with an Alternative Currency?
There are several factors that make it very important to hedge the Pakistani rupee with an alternative currency.
Political Unrest
The political situation in Pakistan has been unstable for many years. The year 2022 was the worst in this case when opposition parties in the National Assembly filed a no-confidence motion against Prime Minister Imran Khan, owing to the country’s poor performance in economic indicators during his rule. Consequently, Imran Khan was removed from office, and a caretaker government was established until the holding of general elections in 2024.
The political unrest raises many questions about the country’s economic situation. As a result, foreign investors are reluctant to invest there and are prone to withdraw their funds, due to which the currency value is declining.
Inflation
As per records, the inflation rate in Pakistan in February 2024 is reported to be 23%. The prices of goods and services are soaring to new heights, causing a decline in the purchasing power of the currency.
The rising inflation rate is highly discouraging for foreign investors, due to which the value of the currency is continually declining in the international market.
Trade Imbalance
Pakistan’s trade imbalance or deficit is one of the fundamental reasons for currency devaluation. Simply put, Pakistan is spending more on imports than it is earning from its exports, causing the outflow of foreign currency, and thus depreciating the value of the Pakistani rupee.
Interest Rates
The appreciation or depreciation of the Pakistani currency is always seen relative to the US dollar. So, when the interest rate in the US increases, investors tend to move their funds to the US to take advantage of the high interest rate. The withdrawal of funds from the economy causes the depreciation of the Pakistani rupee against the US dollar.
Debt Burden
Debt deficit is one of the main factors influencing the valuation of the Pakistani Rupee.
Due to its unstable financial position, Pakistan has always been under high debt. The country needs to take on debt from the IMF to sustain itself. It must pay both principal payments and interest. Investors are concerned about the country's ability to repay its debt and have reservations about it.
Shortage of Foreign Investment
All the above factors directly or indirectly hinder foreign investment, which is one of the most important sources for a country to generate income. Pakistan heavily depends on foreign investments to improve its economic and financial stability.
Final Thoughts
The potential depreciation of currency puts it at risk of higher inflation, declining the purchasing power of consumers, and causing financial instability. Therefore, it is better to hedge the risks through investment in foreign currencies to avoid any loss caused by the devaluation of the currency.
FAQs
Which foreign currency is the best to buy in Pakistan?
The three best currencies to buy in Pakistan are the US Dollar, the European Euro, and the Swiss Franc.
Is it better to buy gold or dollars in Pakistan?
Although gold and the US dollar are both attractive options for investors to protect their savings, the dollar may be exposed to the risk of shortage due to low foreign exchange reserves. Comparatively, it is better to invest in gold owing to a remarkable increase in its value witnessed in recent years and its ability to maintain its value amidst economic uncertainties.
Is it safe to invest in gold now in Pakistan?
Yes, it is quite safe to invest in gold in Pakistan. In 2024, gold is expected to further increase in value as forecasted by expert analysts, owing to an expected decrease in interest rates by the Federal Reserve Bank.
Is it wise to invest in gold in Pakistan?
Yes, gold is an international commodity. Its value appreciates relative to its prices in the international market. Therefore, investing in gold is a wise and high-return option.
