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Pakistani rupee sinks to record low against dollar
(AFP) / 31 May 2012
The rupee sank to its lowest level against the dollar Thursday amid panic in the country’s fragile forex market, as Pakistan’s central bank denied it would have to return to the International Monetary Fund (IMF) for assistance.
The currency slid 0.9 percent to 93.8350 per dollar, which is a record low, according to Malik Bostan, president of Forex Dealers Association.
In an interview published in The Wall Street Journal on Tuesday, bank governor Yaseen Anwar was quoted as saying the government’s failure to control the deficit could make it difficult to meet the more than $4 billion in IMF loans due in the fiscal year starting July 1.
“This statement created havoc in the market causing a drop of 1.3 percent in the rupee’s value against dollar in two days,” Mohammad Sohail of Topline Research told AFP.
However, in comments issued on Thursday, the State Bank of Pakistan said the country faced no risk in being able to make next year’s IMF payments from its reserves.
“The decline in our projected reserves will be partially offset by an increase in remittances which will exceed $13 billion this fiscal year,” Anwar said.
“Additional foreign direct investment (is) in the pipeline that includes US company investments in the power sector,” he said.
But he conceded that the fiscal deficit and the lack of external financing will continue to challenge Pakistan, especially the central bank.
“Yet, let me assure you that Pakistan will not stumble into a situation that requires emergency external assistance,” he added.
Analysts said another factor that had devalued the rupee by 4.1 percent this year was the uncertainty over Pakistan’s now six-month blockade on NATO supplies to Afghanistan.
“The rupee is in greater pressure as well because of the delay in the settlement of Pakistan’s dispute with NATO, which has made uncertain the payment of billions of dollars of the Coalition Support Fund to Pakistan,” Sohail said.
Pakistan sealed its Afghan border to NATO supplies last November after US air strikes killed 24 Pakistani soldiers. It has conditioned its reopening on an American apology and an end to US drone strikes on militants.
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