KARACHI – Pakistan’s rupee plunged almost five percent to a record lowFriday after what appeared to be a sixth devaluation by the central bank inthe past year as the country struggles with an acute balance of paymentcrisis.
The unit sank to 143 rupees against the dollar just a day after PrimeMinister Imran Khan’s government celebrated 100 days in office with atelevised conference boasting of its achievements.
The State Bank of Pakistan has indirectly devalued the state-managed unitseveral times already as it tries to narrow a huge balance of paymentsdeficit.
But traders are growing concerned that neither Khan nor his FinanceMinister Asad Umar laid out a comprehensive plan to address the country’seconomic woes more than a week after negotiations with the InternationalMonetary Fund ended without a much-needed bailout agreement.
The former cricketer has launched a highly publicised austerity drive sincebeing sworn in, including auctioning off government-owned luxury vehiclesand buffaloes, in addition to seeking loans from “friendly countries” andmaking overtures to the IMF.
“The market was disappointed to see that there was no clear cut directionof the government regarding raising loans from IMF or taxation policies forthe rest of its term,” said Hamad Iqbal, director of research at ElixirSecurities.
The rupee has lost about a third of its value since the start of the yearas Pakistan struggles with chronic inflation as it burns through itsdwindling foreign currency reserves, which are down around 40 percent thisyear.
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Pakistan secured $6 billion in funding from Saudi Arabia and struck a12-month deal for a cash lifeline during Khan’s visit to the kingdom inOctober.
Despite the pledges, the ministry of finance said Pakistan would still seekbroader IMF support for the government’s long-term economic planning.
With talks with the IMF still ongoing — Pakistan has been a regularborrower from the IMF since the 1980s — Khan’s new government has beensearching for ways to rally its struggling economy.
Islamabad has received billions of dollars in Chinese loans to financeambitious infrastructure projects, but the US — one of the IMF’s biggestdonors — has raised fears that Pakistan could use any bailout money torepay its debts to Beijing.
The IMF and World Bank forecasts suggest the Pakistani economy is likely togrow by four to 4.5 percent for the year fiscal year ending June 2019compared to 5.8 percent growth in the last fiscal year.
