By maintaining policy rates, the MPC displayed reasonable prudence. With Fed steamrolling quantitative tightening, Putin’s escalation of war,  and the large blackhole that China’s real estate is in, there is no way Pakistan can be overly cautious. World Bank estimates, that more than 50 sovereign debt defaults will occur in 2023. And even though more than $100bn debt will be rescheduled, liquidity will be extremely thin, amidst sky rocketing CDS’.

In a poll by Reuters, asked what was the best approach to strengthen emerging market currencies against the dollar, around 40% analysts, said central banks needed to hike interest rates more aggressively. 30% said there was nothing that could be done. 10% suggested central banks should continue selling their dollar reserves.

Yet, this is the first time that developed countries are openly and aggressively intervening to make their currencies strong after decades of market determined rates, as part of the reverse currency wars. This, along with policy intervention is being done to make their currency strong and tame inflation. Group of Seven financial leaders reiterated excessive exchange rate moves were undesirable. In retrospect, Pakistan’s primitive forex market provides a window of opportunity to control rates more easily, and this trend of strengthening Rupee will continue till at least 210/$.

There has been a continuous erosion of country’s forex reserves. Last week, they dipped by US$342mn, primarily due to a loan repayment of $250mn. FX swaps are also in negative territory and depict thin dollar liquidity in the interbank market. Pakistan CDS (Credit Default Swaps) are also on the rise. In spite of all this, Rupee will continue strengthening due to the current regime’s viewpoint.


  • Headline CPI rose 0.4% in September, and core CPI increased 0.6%. Even with some easing on a year-ago basis, the details of the report suggest inflation still has plenty of momentum and remains broad-based.
  • Market has priced in a 75bps rate hike this month and 50bps hike in December
  • This week’s U.K. data offered increasing evidence of a slowing economy. August GDP unexpectedly fell 0.3% month-over-month
  • sterling capitalized on speculations that PM Liz Truss may reconsider making changes to the mini-budget.
  • Europe is facing turmoil as tensions loom with Russia


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