Pakistani Rupee Stocks Tumble Amid Political Uncertainty; Fitch downgrades its rating
Pakistan is rapidly heading for total financial collapse as the rupee hit another record high against the US dollar while the stock market shed at least 1,500 points in two days after Fitch Ratings downgraded the country’s credit rating. country from “stable” to “negative”.
The rising political temperature has also created untimely political uncertainty in the country.
Fitch Ratings downgraded Pakistan’s economic growth with reference to Pakistan’s agreement with the International Monetary Fund (IMF) to impose tough measures to increase the tax base in the country, aimed at reviving the financing facility program extended (EFF).
Fitch maintained that even if he assumes that Pakistan has reached a staff-level agreement with the IMF, the implementation of the program will be very difficult given the persistent and prevailing political situation in the country, the uncertainty about the political stability of the government in power and its ability to implement tough measures, which the government has agreed with the IMF.
Fitch’s downgrade and the prevailing political uncertainty hit the Pakistani rupee hard, which fell to Rs 224 against the US dollar, while the Pakistan Stock Exchange lost at least 1,500 points in two trading days.
“The recent movement of the rupee is characteristic of a market-determined exchange rate system. In this system, the current account position, relevant news and domestic uncertainty together determine daily currency fluctuations,” he said. said the State Bank of Pakistan.
“The recent depreciation of the rupiah against the US dollar is also largely a global phenomenon. Globally, the US dollar jumped 12% in the past six months to a 20-year high, The US Fed has been aggressively raising interest rates in response to rising inflation,” he added.
On the other hand, brokerages argued that the bears took the lead in the Pakistan Stock Exchange (PSX) as the bloodbath continued.
“Selling momentum continued across the board due to political unrest and the devaluation of the rupiah against the US dollar,” brokerage Asif Habib said.
With no sight of a settlement in the political arena between the ruling government of Prime Minister Shehbaz Sharif and his arch political rival Imran Khan, the problems for Pakistan are far from over.
(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)