The Pakistani rupee plunged about 7 percent in apparent central bank devaluation, while the stock market snapped a six-day skid after the government said it plans to seek a bailout from the International Monetary Fund (IMF).
The South Asian nation’s key stock measure snapped six days of losses to advance 1.6 percent, the most in three weeks, at the close while its dollar-denominated bonds maturing in 2027 climbed the most since July 26 before paring gains. The rupee, a managed float, fell 7.5 percent to 133.64 against the dollar, the most in a single day since 2000. The move is speculated to have been pushed by authorities in response to the IMF’s calls for a weaker exchange rate.
Prime Minister Imran Khan, who came to power after July elections, is under pressure to generate external funding as the country faces the latest in a long line of financial blowouts. The IMF said last week that recent government efforts haven’t been sufficient to stem a looming crisis.
“The challenge for the current government is to ensure that fundamental economic structural reforms are carried out to ensure that this spiral of being in an IMF program every few years is broken once and for all,” the Finance Ministry said. “To correct the underlying imbalances, fiscal and monetary actions needed to be undertaken without delay.”
Pakistan’s fiscal deficit was on target to hit 7.2 percent of gross domestic product in the fiscal year ending in June 2019, but the government has introduced measures to bring it closer to 5 percent. It’s the economy’s dollar shortage that presents a bigger problem. The current account deficit widened 43 percent to $18 billion in the year that ended June 30, while the fiscal deficit ballooned to 6.6 percent.