Pakistani rupee falls nearly 4% to new low

COUNTRY NEEDS $8B LOANS TO AVERT A BALANCE OF PAYMENT CRISIS

The Pakistani rupee fell nearly 4 per cent yesterday, continuing its losing streak to hit a new record low as finance minister Asad Umar travelled to Indonesia for bailout talks with the International Monetary Fund (IMF).

Pakistan needs “bridging loans” of about $8 billion (Dh29.3 billion) to avert a balance of payments crisis amid dwindling forex reserves, which fell to $8.4 billion during the week ending September 28, its lowest in four years, creating a shortage of dollars and impacting the local currency.

The rupee hit a fresh low of 133.25 after falling as much as 3.7 per cent, before trading 2.79 per cent lower at 132.065. The currency shed 8.7 per cent in the previous session.

“This move looks like a measure to boost the economy and improve the balance of payments situation in the country as exports are likely to see an upward swing,” Sudhesh Giriyan, chief operating officer at Xpress Money Services Ltd told Gulf News.

Because of this optimism, the Karachi Stock Exchange KSE100 Index extended gains for another session. The index rose 0.75 per cent to 38,792.09.

More pain likely

However, analysts feel that more pain may be in store for the battered currency. Pakistan may be headed for more trouble given its ballooning current account deficit. Even if the IMF funds come, it will be barely enough to meet two months of imports.

“That the Pakistan economy and its markets remain in really rough shape, there is no hiding from this and the fact that investors are more than aware of the number of times Pakistan has sought help from the IMF in its relatively short history as a country does inevitably weigh on the reputation of investing in Pakistan,” Jameel Ahmad, Global Head of Currency Strategy & Market Research at FXTM told Gulf News.

IMF senior economist The Indian rupee strengthened yesterday, reversing from the record weakness in the previous session.

The rupee rose by 0.20 per cent to 74.20 per dollar. The rupee hit a record low of 74.395 on Tuesday.

“The near to medium term trend is still weak in the Indian rupee. We may see depreciation of 2-3 per cent from here over the next 3-6 months in the backdrop of rising US bond yields and weakness in the local equity markets and steady increase in oil prices,” Phaneendar Bhavaraju, Head forex and Global Market Stratgegy at Arrow Capital DIFC told

The Indian rupee has shed more than 16 per cent since the start of the year as rising oil prices meant higher import bills and a current-account deficit. Harald Finger said the problems in Pakistan mostly stemmed from an overvalued exchange rate and excessively easy credit.

Oil weighs

“The fast rise in international oil prices, normalisation of US monetary policy, and tightening financial conditions for emerging markets are adding to this difficult picture. In this environment, economic growth will likely slow significantly, and inflation will rise,” he said in a statement.

Washington, which recently suspended military aid to Pakistan over its alleged failure to crack down on the Taliban, has expressed concern about IMF funds being used to repay Chinese loans.

“The downtrend in the Pakistani rupee is likely to continue and the UAE dirham could fetch 40 against the rupee in short term,” Vijay Valecha, chief market analyst, Century Financial said. The dirham fetched 33.47 rupees yesterday.