Pakistan rupee takes further beating October 16th 2008

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KARACHI: Rupee extended its losses in the interbank market as well as open currency market on Thursday. The US dollar rose by 100 paisas in the interbank market to close at Rs 82, said a bank treasurer. The greenback was trading near Rs 87 in the open market, said a dealer. “You can see rupee is so weak against the dollar that it has now started losing 100 paisas every day,” said a bank treasurer. He said the situation in the foreign exchange market was very bad. “There is no let up in demand from the importers, but exporters are holding back their proceeds. There have been talks of large inflows, but little has actually come in,” he added. He said investment in dollars by speculators was exacerbating the situation. “People who used to invest in stocks and property are now investing in dollars, which is adding to pressure on rupee.” The rupee has lost over 33 percent since the beginning of the current calendar year. On the other hand Pakistan’s foreign exchange reserves have declined to $8.32 billion from $16.486 billion in October 2007. Extraordinarily large trade and current account deficits have caused this sharp decline in rupee’s value and the foreign exchange reserves. Pakistan’s trade deficit in the first quarter stood at $5.549 billion, 52.65 percent higher than last year. The government has pinned its hopes on aid and loans from multilateral agencies and friendly countries, but so far only Asian Development Bank has provided help. Pakistan received $500 million from the bank a few days ago but experts say much more is needed. “We need at least $5 billion now. The World Bank has pledged some money. But they will release it in installments. It is like delaying treatment to a dying patient,” said an analyst. “Right now we are not going to default on our external payments, but we will if the situation continues to remain the same.” mushfiq ahmad

Source: Daily Times, 17/10/2008

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