Pakistani rupee slides again by one percent

May 19th, 2008 - 11:03 pm ICT by admin  

A file-photo of Nawaz Sharif
Karachi, May 19 (DPA) Pakistani rupee Monday slid by one percent to close at a new record low as demand for the US dollar continued to soar over rising import costs, dealers said. The rupee in the inter-bank market hit its lowest level against the dollar to close at 69.60/69.80 against Saturday’s 68.30/68.70. The previous low in the inter-bank was May 9 at 69.40/69.60 versus dollar.

Meanwhile, in the unofficial open market the US dollar soared to more than 70 against Pakistani rupee, dealers said.

Economists say the rising oil prices and galloping inflation, which has already reached its highest level in the last 30 years, are weakening rupee against all major currencies.

The rapid decline of foreign exchange reserves is also a factor in eroding the rupee’s value by around 12 percent since the beginning of 2008.

The central State Bank of Pakistan (SBP) has lost around $4.18 billion in the last five months from the peak of $16.48 billion in October last year.

Latest data by the central bank reveals a decline by $49 million to $12.20 billion on week ending May 10. The reserves are a mix of central bank’s own reserves as well as foreign exchange accounts held by private commercial banks.

Combining both, the central bank’s reserves are alarmingly low at less than $10 billion.

The last week’s cut in the sovereign rating by Standard & Poor’s rating agency also increased pressure on the rupee, as analysts expect less foreign investment in the country.

The S&P last Thursday cut Pakistan’s long-term currency debt sovereign rating to B from B+, citing expanding fiscal and external imbalances in the background of volatile political setting.

Political uncertainty is also a contributing factor in weakening the rupee.

The main ruling coalition partner, Pakistan People’s Party, entered into a crisis last week following resignations by nine cabinet ministers from its ally - Pakistan Muslim League-Nawaz - of former premier Nawaz Sharif. The cabinet members also include Finance Minister Ishaq Dar.

Sharif, however, has pledged his continuous support to the government of Yousaf Raza Gillani despite the resignations in the wake of differences over how and when to reinstate judges deposed by military-dictator-turned-civilian president Pervez Musharraf.

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