KARACHI: The Pakistani rupee on Wednesday sunk to a fresh two-year low of 105.80 against the greenback in the interbank market, falling 56 paisa from its previous closing.

In the open market, the rupee was down 30 paisa from Tuesday's closing, trading at 105.60 against the USD.

Due to the rise in the value of the dollar by Rs1.40 in the last two days, Pakistan's external debt is likely to see an increase of Rs84 billion, financial analysts said.

The recent climb of the dollar against the rupee has been attributed to a strong demand of the greenback from importers and its outflows from the country.

Citing number of reasons for growing demands of US dollar, Chairman AKD Group Aqeel Karim Dhedhi said that ill-conceived government policies have invited the people to convert rupee into dollars and to invest in Pakistan Bonds which has interest rate of 8.25 percent.

He said that devaluation of rupee will have a snowball affect on the economy and also resulted in price-hike and increase in country’s debt.

He said credit must go to overseas Pakistanis who sent remittances, which help reduce current account deficit otherwise the blunder committed by government’s financial wizards push the country into debt trap.

Currency dealers are of the view that the growing demand of greenback is due to oil-related payments.

There were a few import payments in the market and banks were already short of them, and as the rupee crossed the 104.50 level it triggered 'stop', surging the rupee past the 105 figure," they maintained.

It's no coincidence that it happened on a day when the Finance minister initiated meeting with the IMF (International Monetary Fund) and also when economic managers are assessing the damage from the deadly earthquake," analysts added.

Despite strong foreign exchange reserves and narrowing current account deficit, the rupee is constantly losing its value. The rupee depreciated 3.5 percent since the beginning of the current fiscal year.