The currency slid 0.9% to 93.8350 per dollar, which is a record low, according to Malik Bostan, president of Forex Dealers Association.
In an interview published in The Wall Street Journal on Tuesday, bank governor Yaseen Anwar was quoted as saying the government's failure to control the deficit could make it difficult to meet the more than $4 billion in IMF loans due in the fiscal year starting July 1.
"This statement created havoc in the market causing a drop of 1.3% in the rupee's value against dollar in two days," Mohammad Sohail of Topline Research told AFP.
However, in comments issued on Thursday, the State Bank of Pakistan said the country faced no risk in being able to make next year's IMF payments from its reserves.
"The decline in our projected reserves will be partially offset by an increase in remittances which will exceed $13 billion this fiscal year," Anwar said.
"Additional foreign direct investment (is) in the pipeline that includes US company investments in the power sector," he said.
But he conceded that the fiscal deficit and the lack of external financing will continue to challenge Pakistan, especially the central bank.
"Yet, let me assure you that Pakistan will not stumble into a situation that requires emergency external assistance," he added.
Analysts said another factor that had devalued the rupee by 4.1% this year was the uncertainty over Pakistan's now six-month blockade on NATO supplies to Afghanistan.
"The rupee is in greater pressure as well because of the delay in the settlement of Pakistan's dispute with NATO, which has made uncertain the payment of billions of dollars of the Coalition Support Fund to Pakistan," Sohail said.
COMMENTS (9)
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Time for a new rupee ...10 rupees equal 1 USD ....It will control the Black money plus the Rupees injected by foreign powers to destabilize Pakistan Economy.
Any response from the concerned quarters...?
@Rajendra Kalkhande:
"Pakistani Rupee is not alone, even India Rupee has fallen. There is turmoil world over. Entire world is passing through bad economic phase."
While the global economic turmoil has some some effect on Indian rupee's decline, a lot of it has to do with the bad macro economic policies such as deficit financing. The Indian government has grown too large and is spending too much.
As for Pakistani rupee problems, it is directly a result of Pakistan's bad management of macro economic factors.
The Pak Rupee exchange rate is stated to be Rs.94 in the article. Isn't the official exchange rate fully controlled by the government? What is the black market rate in Pakistan? This unofficial rate is probably closer to the true value of the Pak rupee. I am sure it is well above Rs.105 to 110.
Instead of dragging their feet they should make it one rupeee Pakistan = $ 1.oo. This will ease the problem of conversion and conversion. HADI SAKEY
@Rajendra Kalkhande:
We know that. It is not the reason for exchnage rate weakness. Stop blaming outside forces for your problems -- India and Pakistan.
Pakistani Rupee is not alone, even India Rupee has fallen. There is turmoil world over. Entire world is passing through bad economic phase.
@ True Muslim Paki: the same banking system exists in most of the developed countries, why haven't they failed. In my view, islamic banking is only a marketing trick which the banks use to net Islam-bindfolded customers, in a islamic country like ours. Please read up the agreement text, before sign-up for any of the islamic banking products.
This is the reason why we should adopt Islamic Banking. The western system of banking has failed, but show me one country where Islamic Banking exists and it has failed.
Keep on printing money with no null economical activities and growth. This would decrease value of your currency. . .Finance it is.!!!!!!!!!!!!