Probability of currency crisis exceeds 50%, says Bloomberg report

The odds of Pakistan facing a currency crisis surpassed 50% after devastating floods lashed the country, killing hundreds and displacing millions, a Bloomberg Economics risk model revealed on Tuesday.
According to economist Ankur Shukla, the possibility of a currency crisis involving a large depreciation of the nominal exchange rate and extensive depletion of foreign-exchange rates could rise to approximately 59% in June 2023, compared to 29% in August 2022.
“Crop damage and a host of other problems stemming from the disaster all but erase any progress toward stability that came with the IMF’s aid,” Shukla stated, adding that progress towards stabilising external balances had been undone by the floods.
Shukla used a currency risk model which initially applied to Pakistan but would be expanded to analyse other emerging markets.
Pakistan secured a $1.1 billion loan from the International Monetary Fund (IMF) in late August to avoid an imminent default, but deadly floods wrought damages of about $30 billion. Islamabad since then has made an urgent appeal for debt relief.
Returning to his former post, Finance Minister Ishaq Dar – a known advocate of a stronger currency – believed that the rupee would strengthen to its fair value which is below Rs 200 per US dollar.-Agencies