Pakistan faces currency crisis danger, says Nomura

Nomura Holdings, a Japanese financial holding company and investment bank said that Pakistan is now at a high risk of currency crises, The News International reported citing Reuters.
Apart from Pakistan, the Japanese bank said that there were seven countries including Egypt, Romania, Sri Lanka, Turkey, the Czech Republic, and Hungary now at a high risk of currency crises.
The Japanese bank said that 22 of the 32 countries covered by its in-house “Damocles” warning system have seen their risk rise since its last update in May, with the largest increases in the Czech Republic and Brazil, according to The News International.
“This is the highest total score since July 1999 and not too far from the peak of 2,692 during the height of the Asian crisis,” Nomura economists said, calling it “an ominous warning sign of the growing broad-based risk in EM currencies”.
Currently, Pakistan’s cost of insuring exposure to five-year sovereign debt rose by 1,224 basis points over the weekend, hitting the highest-ever level of 92.53 per cent.
After the local beverage showed the data on Monday, the analysts said that the country’s sovereign dollar bonds would remain vulnerable until the political standoff between the government and the main opposition party of former prime minister Imran Khan is settled.
Pakistan’s economic conditions are far worse these days due to political uncertainty.
On Monday, in the inter-bank market, Pakistan’s rupee maintained its downward trend against the US dollar, falling by 0.22 per cent, Business Recorder reported. As per the State Bank of Pakistan (SBP), the rupee closed at 223.66 after a decline of 0.49. In the last seven trading sessions, the currency has lost Rs 2.24 or 1 per cent against the greenback.
Pakistan’s total debt and liabilities spiked by Pakistani Rupees (Rs) 12 trillion or 23.7 per cent in the first quarter of the current fiscal year, the loan tranche from the International Monetary Fund and the devaluation of the rupee pushed the numbers up significantly, The News International reported citing analysts.