LAHORE – The US dollar spiralled out of control as the Pakistani rupee depreciated Rs18.89 against the greenback on Thursday(march-02) amid political & economic uncertainty.

The greenback was being traded at Rs285 in the interbank market around 11:30’am. The historic plunge in the value of the local currency followed the monetary policy review & delay in the IMF’s deal.

According to Arif Habib Limited, the appreciation in the interbank market continues after the government curbed imports to manage the depleting foreign exchange reserves amid a high risk of default.

The development comes as the market expects further monetary tightening to control inflation at the SBP’s emergency MPC meeting is scheduled for later on in the day. The local currency had fallen against the greenback on Wednesday(march-01), settling at 266.11 after a depreciation of 1.73 % or Rs4.61 in the inter-bank market.

— Moody’s downgrades Pak’s credit rating to ‘Caa3’ —

On Tuesday last, Moody’s downgraded Pakistan’s local & foreign currency issue & senior unsecured debt ratings to Caa3 from Caa1.

The decision to downgrade the ratings is driven by Moody’s assessment that Pak’s increasingly fragile liquidity & external position significantly raises default risks to a level consistent with a Caa3 rating, said a statement.

In particular, the country’s foreign exchange reserves have fallen to extremely low-levels, far lower than necessary to cover its imports needs & external debt obligations over the immediate & medium term.

Moody’s added that it has also downgraded the rating for the senior unsecured MTN programme to (P)Caa3 from (P)Caa1. The agency noted that it has changed the country’s outlook to “stable from negative”.