Pakistan rupee stable despite Moody warning

KARACHI - The Pakistani rupee on Saturday remained stable despite an earlier warning of 20 per cent devaluation by US-based Moody Investors Service.

By (DPA)

Published: Sat 14 Jun 2008, 6:20 PM

Last updated: Sun 5 Apr 2015, 1:09 PM

Moody has forecasted Pakistani rupee to depreciate to touch 78 against the US dollar in next two years as compared with current trading levels of 66, citing economic and political concerns.

The credit agency in a report, released on Friday from New York, predicted the rupee would drop to over 70 against the dollar in the upcoming fiscal year 2008-2009, starting from July 1 and hitting 75 by next fiscal 2009-2010 and eventually over and above 78 by fiscal 2010-11.

It cited external imbalances, mainly foreign debt servicing and fiscal deficits, as the main reasons.

The country's central State Bank of Pakistan has already lost over 4.5 billion dollars in foreign exchange reserves during the last six months to over 10 billion dollars from the peak level of 16.48 billion last October 31.

However, according to local dealers, the rupee remained stable at 66.50/66.80 (buying/selling) against the dollar in the inter-bank market despite the Moody's research report.

Dealers said expectations of interest rate increase by the central bank by June-end and chances of inflows from foreign countries in the shape of emergency loans are keeping the rupee in control.

But Moody's said such aid and help from multilateral agencies and countries like Saudi Arabia would provide short-lived respite, terming the long-term outlook risky.

"The key risk to the outlook is a failure of demand-management policies and exchange rate adjustments to rein in the size of Pakistan's external deficits," it said.

According to the Moody's, emergency assistance from key external allies, such as in the form of Saudi oil conma provide some financing support but domestic demand of dollar need to be restrained through a cut in import growth rate.

The Pakistani rupee has lost over 14 per cent against the dollar in the outgoing fiscal year 2007-2008, ending on June 30.

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