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KARACHI: The Pakistani rupee slumped 3.8 percent against the dollar on Monday before slightly recovering in what appeared to be the third currency devaluation in seven months by the central bank, traders said, as Pakistan faces a balance of payments crisis.
At 0830 GMT, the rupee was at 119.25 per US dollar after opening at 115.63. Earlier in the day, it had traded close to 120 per dollar, currency traders said.
“It was expected. So far no intervention seen by State Bank. It is expected that the central bank’s intervention may come soon just to keep the dollar within the rage of 120,” Fawad Khan, head of research at BMA Capital, said.
A spokesman for the central bank didn’t respond to Reuters’ request for comment.
In December and in March, the rupee was devalued, each time by about 5 percent, by the central bank.
Pakistan’s economy is expanded to expand by close to 6 percent this year, the fastest pace in more than a decade, but a widening of the current account deficit has fuelled speculation the country will need its second International Monetary Fund (IMF) bailout since 2013.
The current account deficit now stands at $14 billion, around 5.3 percent of gross domestic product, a State Bank of Pakistan official said.
The economic outlook has been hurt by the fast depletion of Pakistan’s foreign currency reserves, which now stand at just over $10 billion, or two months worth of imports.
Pakistan is currently in discussions with China for loans to ease pressure on its foreign currency reserves.
Over the weekend, the shortage of foreign currency widened the spread at which the rupee is traded in the open market and the interbank market to 4 rupees.