Jan. 9 (Bloomberg) -- Pakistan’s rupee fell to a record low against the dollar on concern the nation’s trade deficit will climb from a 3 1/2-year high as Europe’s debt crisis hurts demand for its exports.
The currency slid 0.3 percent, the most since Dec. 27, before the Islamabad-based Federal Bureau of Statistics publishes trade data for the last six months this week. The value of overseas shipments fell $2.2 billion below that of imports in November, the widest gap since April 2008, official data show. Pakistan cut last month its economic-growth forecast for the year through June 2012 to 3.6 percent from 4.2 percent.
“The widening trade gap is the biggest concern for investors, increasing pressure on the rupee,” said Sayem Ali, a Karachi-based economist at Standard Chartered Plc. “It will accelerate inflation and hurt growth further.”
The rupee dropped to 90.985 per dollar as of 12:59 p.m. in Karachi, the weakest level at least since 1988, when Bloomberg started tracking the data. It may fall to 95 by the end of June, Standard Chartered’s Ali predicted.
The currency lost 4.9 percent last year as floods in August forced more than 1 million people from their homes and damaged crops in parts of southern Pakistan still recovering from 2010’s worst ever monsoon inundations that devastated the region.
The rupee also depreciated on concern foreign-exchange supplies will shrink as international aid dwindles.
The U.S. held back $800 million in military assistance in July out of $2 billion pledged for this fiscal year because of disputes over how to combat terrorism. The International Monetary Fund ceased aid in 2010 after the country failed to meet loan conditions.
Relations with the U.S., Pakistan’s biggest export market, soured after a U.S.-led NATO airstrike on the border with Afghanistan killed 24 local troops in November. In response, Pakistan closed border crossings to trucks carrying supplies for U.S.-led forces in Afghanistan and ordered American troops to vacate the Shamsi airbase in the country’s southwest that has served as a launching point for Predator unmanned aircraft.
“The currency was quite stable before the airstrike and tension with the U.S.,” said Malik Bostan, a spokesman for the Karachi-based Forex Dealers Association. “The government will have to limit its decline through the central bank, or it will keep falling. It will accelerate inflation and will hurt the already-dying industry.”
--Editors: Anil Varma, Ven Ram
To contact the reporters on this story: Farhan Sharif in Karachi, Pakistan, at firstname.lastname@example.org.
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