Original title: foreign exchange such as water, this 200 million population of large countries, per capita savings only 50 dollars!
The gate of the city fire and the fish. Besides, in a crowded fish pond, a big fish with strong shape can turn over and drink water.
If we compare the world economy to a fish pond, the United States is the largest fish in the pool, and the liquidity of the dollar is the precious oxygen in the water.
With the recovery of the US economy and the pace of the Federal Reserve raising interest rates continuously, the US dollar capital flows back to the US. When the big fish sucks up the oxygen in the pond, the remaining small shrimps are suffering from anoxia.
So recently we saw that emerging market countries collapsed like Domino: Brazil, Argentina and Turkey continued to break their bonds.
Today, the chain reaction is "contagious" to South Asia, and Pakistan, which has nearly 200 million of the population, is unlucky.
3 devaluing in half a year
The Central Bank of Pakistan announced a 3.7% devaluation of the currency rupee to 119.84 rupees per dollar on Monday (June 11th), due to worsening economic conditions and worries about the balance of payments crisis.
This is the third depreciation of the rupee in Pakistan since last December, and the cumulative depreciation rate has been 15% in half a year. The data compiled by Bloomberg show that the rupee is the largest currency in Asia since the beginning of the year.
Daily economic news (micro signal: nbdnews) noted that Pakistan is currently implementing a fixed exchange rate system managed by the central bank, with limited free floating space.
The problem is that to maintain a fixed exchange rate, the central bank needs to have enough strength to support it. Pakistan's foreign exchange reserves are about $10 billion, the lowest level in the last 3 years, while Pakistan's trade deficit in July to May this year was $33 billion 900 million. That is to say, the foreign exchange held by the Central Bank of Pakistan is worth only 3 months' trade deficit.
Pakistan's national newspaper reported on June 6th that Pakistan could face serious problems of balance of payments due to the exhaustion of foreign exchange reserves and the substantial devaluation of the Brazilian dollar against the dollar, which could force the new government to seek financial aid to the international lending institutions, especially the IMF.
In an e-mail statement, the Central Bank of Pakistan said they were monitoring the situation and "are ready to ensure the stability of the financial market and to curb the emergence of speculative pressure."
The trade deficit causes the "dollar shortage"
The daily economic news (nbdnews) noted that the Pakistan rupee devalued the two times in December of last year and in March this year, by about 5% and 4.5%, respectively.
Behind the 3 consecutive devaluation in 6 months, the "dollar shortage" brought by the Pakistan trade "blood loss" has forced the central bank to stimulate export competitiveness by devaluation and exchange valuable dollar foreign exchange.
The Pakistan central bank said in a statement that the market - based adjustment reflects the country's balance of payments, which is due to a huge trade deficit. Pakistan's central bank predicts that the depreciation of the country's currency, interest rate hikes and other measures will "curb external account imbalances".
Some analysts expect the Pakistan rupee to fall further. For example, the Standard Chartered Bank downgraded the Pakistan rupee this month, and it is expected that the Pakistan rupee will fall to 125 rupees per dollar by the end of the year, and says the IMF may require the Pakistan authorities to further lower the rupee exchange rate.
According to the Pakistan Tribune quoted Pakistan Statistical Bureau data reported that the country's imports in May reached the highest value of $5 billion 800 million. Before that, the Pakistan authorities had taken all the measures that could be taken to curb imports, including the introduction of margin and heavy taxes on imports, but so far no success has been achieved. It
The interim finance minister, ahhar, said Pakistan's fiscal deficit was expected to be 6.1%, not only 5.4% of the April government report, but also far higher than the target of 4.1% in the fiscal year to the end of June.
However, Pakistan can also get us dollars imported through FDI (foreign direct investment). According to Pakistan's "commercial records" reported on May 16th, the latest statistics from the Pakistan Central Bank show that China's investment driven role, ten months before the 2017-18 fiscal year (July 2017 -2018 April) foreign direct investment of 2 billion 200 million US dollars, maintaining a steady growth trend of 2.4%, of which China's direct investment in Pakistan The growth rate was obvious, reaching 1 billion 414 million US dollars, an increase of 57% over the same period last year, and continues to occupy the top spot in the direct investment of Palestine.
Temporary finance minister: no IMF will be asked for help before the election
The daily economic news (nbdnews) reporters noticed that emerging market economies, including Pakistan, Argentina and Brazil, have been sold in varying degrees in the macro context of the US dollar strength, the surge in US debt yields and the Fed's increase in interest rates, and these currencies have also depreciated accordingly.
At present, Turkey, Indonesia and India have raised interest rates, and the Central Bank of Argentina has increased three times in the first eight days of May in a desperate way. Pakistan's central bank also raised its policy interest rate to 6.5% last month, the highest level in three years.
In June 7th, the government of Argentina and IMF reached a 3 year standby arrangements (SBA) financing agreement, amounting to $50 billion. Bloomberg commented that Pakistan could learn from Argentina's approach to IMF.
Pakistan's temporary Treasury Secretary, ahtar, says the Pakistan interim government is not looking for assistance to IMF at the moment, and after the July 25th national election, the new government will decide whether to apply for a bail-out loan to the IMF.
Haier, chief executive of Topline securities in Pakistan, told Bloomberg that Pakistan should send a signal to the IMF before the possible loan plan, indicating that Pakistan is trying to reach its rescue standard.
Editor in responsibility: Yu Pengfei
Waonews is a news media from China, with hundreds of translations, rolling updates China News, hoping to get the likes of foreign netizens