UPDATE 4-Pakistani rupee tumbles 3.5 pct on oil, political woes

(Adds central bank statement in paragraphs 7-9)

By Sahar Ahmed

KARACHI, May 9 (Reuters) - The Pakistani rupee fell 3.5 percent against the dollar on Friday, under pressure from a rising oil import bill and fears that the country was suffering political and economic instability.

Since the start of the year the rupee has fallen 12.7 percent against the dollar, and optimism surrounding an election in February that brought the country's two main moderate parties together in a coalition has all but evaporated.

Critics fear divisions within the month-old coalition over how to reinstate judges dismissed by President Pervez Musharraf during a brief period of emergency rule last November have diverted Prime Minister Yousaf Raza Gilani's government from addressing pressing economic problems.

There has been speculation that the coalition could collapse, though party leaders have asserted their unity.

"We need greater leadership on the ground," said a currency trader, who requested anonymity because of the sensitivity of the subject in a market closely shepherded by the central bank.

Amid these worries, the rupee closed at an all time low of 69.40/60 on Friday, compared with Thursday's close of 67.08/20.

The central bank issued a statement saying foreign currency inflows of up to $3.5 billion, mainly from multilateral lenders and friendly governments, were expected in the short- to medium-term, which would help stabilize the rupee.