Pakistan’s rupee had its worst month since 1989 amid a dollar shortage and concerns over a delay in an International Monetary Fund bailout program.
The currency fell more than 14 percent against the dollar in July, ending Friday’s trading at 239 per greenback, the biggest monthly slide since Bloomberg started compiling data in 1989.
It’s also the worst decline globally after Ukraine’s currency for the month.
Pakistan is striving to stave off fears it will follow Sri Lanka into a default this year, as renewed political turmoil raised doubts on whether it would be able to secure its IMF loan tranche. The nation is also trying to obtain funds from countries like China and Saudi Arabia, as it stares down to a $1 billion bond payment in December.
“What’s driving the recent plunge? The finance minister says its due to politics. The central bank governor cites the dollar’s surge,” Ankur Shukla, an economist for Bloomberg Economics in Mumbai, wrote in a report. “The main driver is more straight-forward: fear the country may not secure aid from the International Monetary Fund quickly enough to avoid following Sri Lanka into default.”The turmoil has led bond investors to ditch the country’s dollar debt, sending prices to record lows. S&P Global Ratings cut Pakistan’s credit outlook to negative from neutral on Thursday, saying the nation’s external position is weakening with higher commodity prices, the rupee’s depreciation and tighter global financial conditions.