By DPA,
Karachi : The Pakistani rupee fell by over one percent against the dollar Tuesday to close at 79.60 from 78.60 the previous day amid growing concerns over eroding foreign exchange reserves, traders said.
The decline in the rupee was one of the steepest in Pakistan’s history in a single day as bankers and traders panicked over falling hard currency reserves with the central State Bank of Pakistan (SBP).
Earlier in the day, the rupee was trading at 78.60/78.80 in the open market but sudden import demands later in the day created a severe shortage in the both the inter-bank and open markets.
The SBP reserves last week touched $4.68 billion, barely enough for one month’s imports, leaving no choice but to start using $3.34 billion of private bank deposits some time in the future.
Pakistan has a history of freezing foreign currency bank accounts, as it did in 1998 when it faced a similar situation soon after international sanctions following nuclear tests.
The continuous plunge in reserves from over $16 billion just nine months ago has already downgraded the country’s image among the leading credit rating agencies such as Moody’s and Standard & Poor’s.
Both agencies believe Pakistan is close to a default on commitments against its external loan repayments.
A 15-nation grouping called Friends of Pakistan is scheduled to meet Tuesday in Abu Dhabi to discuss Pakistan’s bail-out request for $15 billion.
“We expect Pakistan’s debt obligations to be met through the Friends of Pakistan conference plus about $5 billion to $6 billion through lateral foreign pledges,” said Asad Farid, economist at AKD Securities Ltd.
Pakistan is currently facing inflation of more than 25 percent and a widening current account deficit of over $14 billion. The country’s currency has depreciated by 22 percent, and the stock market has lost around 50 percent in value in the last six months.