The rupee touched a record low of 91.28 to the dollar on Jan. 9, pressured by worries about higher payments for oil imports and the country’s overall economic health.
The rupee is likely to stay under pressure, and the State Bank of Pakistan on Saturday cautioned that the real challenge is to finance the projected current account deficit. The latest monetary policy announcement kept the key policy rate flat at 12 percent for the next two months.
The current account recorded a provisional deficit of $2.154 billion in the first six months of the 2011/12 fiscal year, compared with a surplus of $8 million in the same period last year, according to data from the State Bank of Pakistan.
The deficit is likely to widen further in coming months because of debt repayments and a lack of external aid.
Dealers said they were also cautious after the International Monetary Fund (IMF) advised Pakistan to take immediate steps to tackle growing budget pressures and raise interest rates to contain inflation.
The IMF last week projected a widening of Pakistan’s budget deficit in the 2011/12 fiscal year to 7 percent of gross domestic product, compared with the government’s revised budget target of 4.7 percent.
In the money market, overnight rates ended flat at the top level of 11.90 percent, unchanged from Tuesday’s close. Dealers said they were awaiting the result of the Pakistan Investment Bond auction, due to be announced later today.
Dealers expect a rise in the cut-off yields in the PIB auction. (Reuters)
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