Pakistani stocks, rupee end flat

KARACHI: Pakistani rupee and stocks ended flat on Friday as the markets awaited clarity on foreign inflows or financial assistance from the International Monetary Fund , dealers said.

Pakistan is facing a balance-of-payments crisis and is expected to get IMF help although the prime minister's top adviser on economic affairs said on Thursday Pakistan had not yet formally asked for an IMF facility.

Total foreign reserves, including those held by commercial banks, have fallen sharply from a high of $16.5 billion in October last year, and stood at $7.32 billion on Oct. 18, of which the central bank accounted for $4.04 billion.

The central bank's reserves represented about one-and-a-half months of import cover.

The rupee was quoted closing at 81.40/50, unchanged from Thursday's close. Dealers said there were some import payments but some hidden inflow of dollars kept the rupee steady.

Currency dealers have suspected some central bank intervention to support the rupee over the past week and though the bank generally declines to comment, it said on Monday it had stepped in to help support the currency.

Despite the expected negotiations with the IMF, the rupee was likely to weaken in the short-term, a dealer said.

"The fundamentals have not changed and until we see foreign inflows the rupee will probably weaken," said a currency dealer.

The rupee has lost 24.3 percent against the dollar this year.

Like most emerging economies, Pakistan was badly hit by soaring global oil and food prices over the past year, but the new government's economic troubles were exacerbated by the failure of the previous administration to cut fuel subsidies.

IMF Managing Director Dominique Strauss-Kahn said on Wednesday Pakistan had requested financial help and talks on a loan programme would begin soon.

But the prime minister's top economic adviser, Shaukat Tarin, later said no formal request had been made to the IMF to help fill a a financing gap of between $3.5 billion and $4.5 billion.

The country had 15 to 30 days to find cash and it was still hoping for help from other lenders, including friendly governments, he said, while adding the country had to be prepared for any possibility.

IMF and Pakistani officials have been holding talks in Dubai this week.

Tarin said on Tuesday Pakistan needed $10 billion to $15 billion of support from foreign lenders to cover its current account financing gap and undertake economic adjustments over the next two years.

The main index on the Karachi Stock Exchange ended flat at 9,182.88 points. The index has fallen almost 35 percent this year but has been propped up by a floor since late August.

The floor is due to be removed on Oct. 27.

The stock market regulator said on Wednesday it had approved a 20 billion rupee fund being set up by the government to support share prices when the floor is removed.

The fund will invest in seven state-owned entities.

Directors of Pakistan's three stock exchanges are due to meet officials of the Securities and Exchange Commission and the National Investment Trust , which will handle the fund, on Friday to discuss ways to ensure a smooth removal of the floor.

An exchange official said four government entities, the NIT, National Bank of Pakistan, Employees Old Age Benefit and State Life Insurance would contribute 5 billion rupees each to the 20 billion rupees fund.