Pakistan’s rupee reached a new record low on Monday, selling at 153 against the dollar in the interbank market to continue a slide that saw it lose more than 5 per cent last week in the wake of a $6 billion loan accord with the International Monetary Fund.
The IMF accord, which must still be approved, foresees a ‘market-determined’ rate for the rupee. At present, the currency - which many analysts consider overvalued - is managed by the central bank in a de facto controlled float.
The State Bank of Pakistan, which lifted interest rates by 150 basis points on Monday to 12.25 per cent, 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 sliding rupee has caused alarm in Pakistan, which is already facing inflation likely to average over 7 per cent for the year and surging costs for fuel and power, which are both heavily influenced by the dollar exchange rate.
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