KARACHI: The Pakistani rupee firmed on Thursday because of increased inflows, after hitting a record low of 90.03 to the dollar the previous day, but dealers expect pressure on the local unit because of bleak economic outlook for the country.

The Pakistani rupee ended at 89.33/49 to the dollar, compared with Wednesday's close of 89.90/96. It has lost about 4.2 per cent this year.

“There were some inflows of about $85 million today which helped support the rupee,” said a bank dealer.

However the rupee is likely to slowly depreciate in the medium term because of pressure on Pakistan's external accounts.

The current account deficit stood at $2.104 billion in July-Nov compared with $589 million in the same period a year earlier. The deficit is likely to widen further in coming months because of debt repayments and a lack of external aid.

Islamabad has to begin repayments on an $8 billion IMF loan in early 2012, and without additional sources of revenue, its foreign exchange reserves may come under pressure, analysts said.

It has to make a repayment of more than $1.1 billion in the second half of 2011/12 fiscal year.

Foreign exchange reserves were at $16.69 billion in the week ending Dec. 9, compared with a record $18.31 billion as of July 30.

There are also concerns on the fiscal side.

The central bank on Monday asked the government to move quickly to broaden its tax base and restructure loss-making public entities to control its widening fiscal deficit, which is already set to overshoot targets.

The State Bank of Pakistan said that the fiscal deficit for fiscal 2011/12 ending June 30 is likely to range between 5.5 and 6.5 per cent of gross domestic product (GDP), “with a bias on the upside”, against a government target of 4 per cent.

The International Monetary Fund (IMF) said in October that Pakistan's 2011/12 fiscal deficit is expected to widen to 5.3 per cent.

The central bank also said in its annual report that the economy is likely to grow by 3-4 per cent during the year, broadly in line with the 3.8 per cent forecast by the IMF, but lower than the government's target of 4.2 per cent.

Stocks ended higher led by the fertiliser sector after Engro Corporation increased its urea price.

“Investors preferred to take new positions in fertilizer stocks after a rupees 100 per bag increase in urea prices by Engro,” said Samar Iqbal, dealer at Topline Securities.

The Karachi Stock Exchange's (KSE) benchmark 100-share index ended 0.33 per cent, or 37.55 points, higher at 11,306.10.

Turnover fell to 33.2 million shares from 46.57 million traded on Wednesday.

Engro ended 4.67 per cent higher at 98.61 rupees.

In the money market, overnight rates ended at 11.90 per cent, unchanged from Wednesday's close, amid short liquidity, dealers said.