Islamabad: Pakistan’s central bank devalued the rupee for a third time since December amid a worsening economy and speculation the country will need support from the International Monetary Fund.
The managed currency dropped as much as 5.1 per cent to 121.5 per dollar in trade Monday, according to bank foreign-exchange traders who asked not to be identified as they are not authorized to speak to the media. The central bank couldn’t be immediately reached for a comment.
The devaluation comes amid a global emerging-market selloff that has convinced Turkey, Indonesia and India to raise interest rates and Argentina to secure a $50 billion rescue program from the IMF to bolster investor confidence. Pakistan’s rupee was already Asia’s worst-performing currency against the dollar since the start of December before Monday’s move.
“It was becoming increasingly difficult to manage the local currency at the current level with dropping forex reserves,’’ said Zubair Ghulam Hussain, chief executive officer at Insight Securities Pvt. in Karachi. “The nation’s current-account deficit had become sizeable and foreign debt repayment obligation were also rising.”
Analysts predict Pakistan’s economic growth will slow in 2018 for the first time in six years. The nation’s foreign-exchange reserves have dropped to the lowest in more than three years, the current-account deficit has widened, while external debt and liabilities as a per centage of gross domestic product climbed to the highest in almost six years in the first quarter.
Pakistan’s central bank increased its target policy rate to 6.5 per cent last month, the highest in almost three years, citing a deteriorating economic backdrop.