Pakistan’s rupee slumped to a fresh record low and the nation’s stocks and dollar-denominated bonds both fell after Fitch Ratings cut the country’s credit-rating outlook. The rupee slid 3.2% to close at 221.99 per dollar, while the benchmark stock index slid 2.4%, and dollar bond due in April 2024 were indicated 14.2 cents lower, the biggest drop ever, at 53.15 per dollar.
Fitch downgraded its outlook to negative Tuesday, citing concern over a "significant deterioration in Pakistan’s external liquidity position and financing conditions” and risks to the implementation of its International Monetary Fund program. Renewed political volatility can’t be excluded and may undermine plans for fiscal and external adjustment, it said.
"Political uncertainty is back again,” said Abdul Kadir Hussain, head of fixed-income asset management at Dubai-based Arqaam Capital Ltd. "USD/PKR goes higher, default risk rises, but also questions arise around the IMF deal. All of it is causing meltdown.”
The rupee has tumbled to a succession of all-time lows in recent days as escalating political uncertainty has added to concern over the country’s bailout deal with the IMF, which it needs to avoid a default.
Former Prime Minister Imran Khan has called for early national elections after his party won by-elections in the country’s most populous state. Khan was ousted in April following a protracted political struggle that saw Shehbaz Sharif take over as premier.
