Pakistan and six other nations- Egypt, Romania, Sri Lanka, Turkey, Czech Republic and Hungary- are at a high risk of currency crises, Japanese firm Nomura has warned.
The Japanese bank said that 22 of the 32 countries covered by its in-house “Damocles” warning system have seen the risk rising since May, news agency Reuters reported.
The report said that the scores generated on the 32 models showed sharp increase from 1,744 to 2,234 since May.
“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”.
The model arrives at a conclusion based on key indicators like country’s FX reserves, exchange rate, financial health and interest rates.
Egypt, which has devalued its currency twice this year and sought an IMF programme, now generates the worst score at 165.
Romania is at the second spot, while Sri Lanka facing economic crisis and currency crisis-regular Turkey have scores of 138.
The Czech Republic, Pakistan and Hungary have a score of 126, 120 and 100, respectively.
Pakistan’s economy has witnessed a major crisis recently. The external debt stood at $130 billion by June, while forex reserves dwindled to $7.59 billion by October.
The $6 billion Extended Fund Facility for Pakistan, approved by the IMF in 2019, was halted, allegedly after the Imran Khan government failed to fulfil key norms.
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