Pakistan rupee reaches record low, sliding more than 3% in a day

Friday, 28 June 2019 00:00 - - {{hitsCtrl.values.hits}}

KARACHI, Pakistan (Reuters): Pakistan’s rupee dropped to another record low on Wednesday, sliding more than 3% in a day, the central bank said.

A currency trader counts Pakistani Rupee notes as he prepares an exchange of U.S dollars in Islamabad

The rupee closed at 161.94 against the dollar in the interbank market, continuing a slide since Pakistan signed an agreement with the International Monetary Fund last month for a $6 billion loan.

The rupee on Tuesday closed at 156.97 against dollar in the interbank market. In the open market it was selling at 162.50 on Wednesday, money exchange dealers said.

The rupee has lost more than 50% of its value since December 2017, stoking inflation and putting pressure on the government as voter anger at higher prices grows.

The IMF accord, which has yet to be approved, foresees a “market-determined” rate for the rupee, which previously has been managed by the central bank in a de facto controlled float.

The State Bank of Pakistan, which raised interest rates by 150 basis points last month to 12.25%, said it was watching the foreign exchange market closely and would act in the case of “unwarranted” volatility.

It said the recent slide “reflects the continuing resolution of accumulated imbalances of the past and some role of supply and demand factors”.

The newly appointed governor of the central bank, Reza Baqir, dismissed the idea of a free-floating rupee in his first news conference, on 17 June, as he outlined reforms aimed at ending instability in the economy.

Pakistan has ballooning current and fiscal account deficits and has seen repeated devaluations of the rupee. Pakistan’s exchange-rate policy is a “market-based” system that follows supply and demand, but that will not be left completely to the market, Baqir said.