Ishaq Dar - State Bank of Pakistan at odds with Finance Minister over Rupee devaluation

Ishaq Dar - State Bank of Pakistan at odds with Finance Minister over Rupee devaluation

ISLAMABAD - Pakistan Finance Minister Ishaq Dar clashed with the central bank on Thursday over a 3.1 percent plunge in the value of the rupee the previous day, denouncing an "artificial" move and vowing a new bank governor would be appointed in days.

Pakistan's rupee had been stable for nearly two years, and the unexpected tumble on Wednesday caught top government officials, including Dar, off guard.

Analysts said the State Bank of Pakistan (SBP) had effectively devalued the rupee by not intervening to prop it up as it usually does.

Traders say the SBP controls the thinly traded rupee market that works as a managed float, while the bank on Wednesday evening backed a weaker rupee, saying it would ease balance of payments pressures in the $300 billion economy.

But Dar said the sharp drop in the rupee was harmful to national interests and criticised the central bank, saying it was not its job to worry about the current account deficit.

"The current account deficit is the work of the finance ministry and to alter it, the State Bank is not supposed to do that," an annoyed Dar told media.

The rupee regained some ground on Thursday, firming by 1.5 percent to trade at about 106.20/50 to the dollar in the late afternoon. A day earlier the rupee tumbled to as low as 108.5.

The central bank governor is appointed by the prime minister and is meant to be independent.

Deputy Governor Riaz Riazuddin was in May appointed as acting governor for three months until a permanent new chief was due to be named in late July.

But Dar said that decision would be brought forward in light of the currency volatility and a new permanent governor would be appointed late on Thursday or on Friday.