Islamabad July 20 2022: Pakistan Finance Minister Miftah Ismail anticipates some reversal in the rupee after the currency’s 5% slump this week spooked bond and equity investors.
“Fundamentally the rupee is fine, there is not much pressure on rupee in the market and we should be okay, and I think that there may be some reversal,” Ismail said in a phone interview on Wednesday. “In terms of the real economic fundamentals, we are fine but the political uncertainty screwed us up.”
Emerging-market currencies are feeling the heat as the hawkish Federal Reserve lures capital toward the US. In Pakistan’s case, the pressure is more acute due to a sharper deterioration in economic fundamentals.
The panic in the South Asian markets also comes from escalating political uncertainty after former premier Imran Khan’s by-election win in the country’s most populous state added to concern over the country’s bailout deal with the International Monetary Fund, which it needs to avoid a default.
Fitch Ratings downgraded the outlook on the nation’s credit rating to negative on Tuesday, citing deterioration in external liquidity position and political risks to the implementation of the IMF program.
The nation’s rupee slid 5% in the past two days, the biggest two-day drop in almost four years, according to data compiled by Bloomberg. Foreign bonds due in April 2024 were indicated 3.3 cents higher on Wednesday at 57 cents on the dollar, after marking their largest daily drop on record on Tuesday.
Some pressure on the rupee will also subside as imports drop to below $6 billion in July compared with $7.8 billion a month earlier, said Ismail. Pakistan revived its IMF loan program last week after a delay and expects to receive about $4 billion in financing from friendly countries after July.
