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Pakistan waits for help as rupee edges to record low
 Pakistan is awaiting help from its friends as the rupee edged to a record low to the dollar during the last few minutes of inter-bank trade on Tuesday, weighed down by worsening economic fundamentals and unrelenting demand for dollars to cover imports.The rupee closed at 78.65/75 to the dollar in inter-bank market. The previous low was made at 78.65 on Monday. The rupee has lost 21.7 percent since the beginning of the year. In the kerb market, the rupee crossed 79 to the dollar for the first time. With red lights flashing across Pakistan's macroeconomic dashboard, the rupee is expected to remain under pressure following a credit rating downgrade by Standard & Poors Rating Agency. The State Bank has just enough foreign currency to cover two months of imports, and a potential default on a sovereign loan is looming in February. Pakistan has a $500 million euro bond debt obligation due in February next year, but analysts believe a default to be averted. "Risk of default on the bond debt obligation due in February 2009 may be a bit exaggerated," Farhan Rizvi, a senior analyst at JS Global Capital Ltd, said. "But if reserves continue to fall at $800 to $900 million per month, then certainly the concern to default will rise too," he said. There is also a T-bill auction on Wednesday with a target of 80 billion rupees. Some bankers said they expected the State Bank to reduce either banks' statutory liquidity requirement or their cash reserve ratio by at least 50 basis points or possibly both. Analysts say Pakistan's best hope lies in the goodwill of multilateral lenders and friendly governments, like the US and Saudia Arabia. "We expect Pakistan's debt obligations to be covered through the 'Friends of Pakistan' conference lined up later this month coupled with about $5 billion to $6 billion through lateral foreign pledges," said Asad Farid, economist at AKD Securities Ltd. Analysts said there are expectations that Pakistan would receive some aid from 'Friends of Pakistan' but were sceptical about the timing. "From the meeting this month, we could get commitments but the payment structure may be over a period of time or even a couple of years," JS Global's Rizvi said. Posted by: Fred 2008-10-08 |
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