KARACHI, Aug 11: Political uncertainty has pushed the rupee to an all-time low against the dollar on Monday.

Market experts said the poor political and economic conditions geared up dollarisation of the economy. The race for buying dollars has also been joined by the small household savers.

Despite a series of recipes used by the State Bank, the dollar has been gaining value leading to faster erosion of the local currency.

Currency dealers said the greenback was closed at Rs73.40, which was an all-time high, while the demand remained high. Since January, the rupee has depreciated by over 17 per cent.

“The dollar gained 70 paisa on Monday putting more pressure on rupee to shed weight in the coming days,” said Atif Ali, a currency dealer.

Analysts said the political uncertainty flared up the situation giving more jolts to the already weak economy.

The country’s reserves are depleting fast putting at risk the country’s ability to pay import bills. The political uncertainty at the highest level has started impacting trading and manufacturing.

“I am witness to many such small businessmen, who have converted their rupee savings into dollars,” said Atif. He said like past, many households had also moved to open market for conversion of rupee into dollar.

If the dollarisation is not checked at this level, business community could wrap up its activities, while the flight of capital would cause yet another blow to the economy. It was observed that businessmen were worried about their rupee savings, while the only option before them was to protect their saving by purchasing dollar.

Analysts believe the process of conversion of rupee saving could gain momentum and the dollarisation process would grip the entire economy.

They said the dollarisation would seriously damage the local currency. The inflation reaching 21 per cent has cut the purchasing power of rupee in the domestic market.

Currency dealers feel that it is not only shortage or high demand and falling foreign exchange reserves, which caused depreciation of rupee but the local currency is itself a de-valued commodity.

“The government has pumped Rs690 billion into the economy during 2007-08 by borrowing from the State Bank. It means the government herself played part in depreciation and the purchasing power of rupee as its impact has started reflecting in the inflation, which is now as high as 21 per cent,” said Aamir Saleem, an analyst.

The government is suffering from the trust deficit, the currency dealers said adding that false announcements regarding inflows of $3.5 billion were made before the end of the last fiscal year, which temporarily supported the rupee but now even after one and half month, no inflows were seen.

“Political tussle at the highest level tells us that the government is not taking the issue seriously while the matter is slipping fast from the hands of the economic managers,” said Atif.

He was of the view that the market was facing ‘emergency’ like situation making the rupee weightless with the passage of each day.

A number of analysts said the oil prices were falling fast in the world market, which should be reflected in the local market that will help the rupee to improve its purchasing power and ultimately it will appreciate against the ‘devil dollar.’

The open market traded dollar at Rs74.20. Some currency dealers rated greenback at Rs74.50, which was also all time high.