The rupee fell to 94.75 to the greenback in trading in Karachi on Friday, down from 94.70 on Thursday, and has now lost 33% of its value against the US currency since March 2008.
“The increase in the international oil price… has affected Pakistan’s foreign exchange reserves and they could suffer further with the repayment of IMF’s instalment due today,” said analyst Mohammad Sohail of Topline Securities.
“These factors have contributed to the panic in the currency market.”
An official of the Ministry of Finance said that Pakistan was set to pay $397 million to the IMF on Friday and hoped it would have a ‘minimal effect’ on the reserves, which stand at $15.18 billion, according to the central bank.
The official added that Pakistan has already repaid $901.4 million to the IMF in previous three instalments.
The Washington-based fund bailed out on Pakistan with an $11.3 billion loan package launched in November 2008 as the country faced 30-year-high inflation rates and fast-depleting reserves, as well as a deadly insurgency.
Sohail said the panic in the currency market may continue next week, if the international oil and commodity prices do not stabilise to a comfortable level.
On the other hand, reacting to the news Pakistani businessmen have urged the government to scrap any further borrowing plans.
Islamabad Chamber of Commerce and Industry President Yassar Sakhi Butt said that the country has to pay $3.4 billion in 2012-13, $3.43 billion in 2013-14 and $1.35 billion in 2014-15 to retire IMF’s loan and country’s foreign exchange reserves will continue to face pressure due to the debt servicing in the next three years.
Therefore, the government should not choose short-term gains over long-term economic instability, he maintained.
Published in The Express Tribune, August 25th, 2012.
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