The Pakistani rupee weakened 3.25 percent in trading against the dollar on Wednesday in what analysts speculated could be a central bank-led devaluation to shore up the economy.
Pakistani Finance Minister Ishaq Dar said in a statement he felt “deep concern and indignation” at what he called an artificial weakening of the currency. He did not say who he thought might be responsible.
The rupee fell to 108.00 against the dollar by Wednesday afternoon, its weakest level in years, after closing at 104.896 on Tuesday.
The steep drop after a long period of stability prompted speculation that the State Bank of Pakistan – which is the biggest player in the market where it operates a de facto managed float – had allowed a devaluation to occur.
“We believe the devaluation is in response to ongoing external challenges that have seen FX reserves decline by about $4 billion from their peak of $24.5 billion last October,” an analyst’s note from Citibank said on Wednesday.
Pakistani exporters have long complained that the rupee is overvalued, hurting their competitiveness.
Finance Minister Dar, however, “expressed deep concern, indignation and disappointment at the fact that the current political situation is being exploited by certain individuals, banks and entities”.
The statement added that “the responsible persons and entities in this matter will be identified and appropriate action will be taken against them in the national interest”.
Analysts speculated the State Bank of Pakistan (SBP) had effectively devalued the currency after the rupee slipped to 108.00 against the dollar by Wednesday afternoon, its weakest level in years, after closing at 104.896 on Tuesday.
In a statement, the central bank said the economy had shown strong fundamentals for a while but “the deficit in the external account has been rising for some time”.
“Accordingly, the exchange rate adjusted in the market and SBP is of the view that this depreciation in the exchange rate will address the emerging imbalance in the external account and strengthen the growth prospects of the country.”