The Pakistan rupee fell to a record low on speculation purchases of dollars by local banks spurred wider buying of the greenback.
The currency declined 0.6 percent to 105.7975 per dollar as of 3:52 p.m. in Karachi, the most since June 28, according to data compiled by Bloomberg. The rupee touched 106.3 earlier, the weakest level in data going back to 1988, and has dropped 8 percent this year.
“There is buying to cover some payments needed by banks,” said Furqan Punjani, an economist at BMA Capital Management in Karachi. “The rippling effect happened because there is a shortage of U.S. currency in the country.”
The International Monetary Fund this month approved a $6.7 billion loan for Pakistan to be disbursed over three years to help stabilize the nation’s economy and boost foreign-currency currency reserves. Prime Minister Nawaz Sharif’s four-month-old government is struggling to end a Taliban insurgency and ease power shortages that have slowed growth.
“Sentiment is also weak since the IMF’s first tranche was less than the $2 billion the market was expecting,” Sayem Ali, an economist at Standard Chartered Plc in Karachi, said in an e-mail. “The central bank’s hands are tied from intervening in the market” as that’s a prerequisite for the IMF loan, he said.
Electricity interruptions and shortages of natural gas sliced two percentage points off gross domestic product in the year through 2012, according to Pakistan’s Planning Commission. The economy has expanded by an annual average of 3 percent a year since 2008, official data show. Reserves at the State Bank of Pakistan stood at $5.2 billion as of Sept. 12, including the first part of the IMF loan, enough to cover two months of imports.