Pakistan_ Turkiye & 5 others  at high risk of currency crisis

Japanese financial holding company Nomura has warned that seven countries including Pakistan and Turkiye are now at a high risk of currency crises. The other five countries are  Egypt_ Romania_ Sri Lanka_ Czech Republic and Hungary.

Nomura said that 22 of the 32 countries covered by its in-house  Damocles warning system have seen their risk rise since its last update since May_ with the largest increases in the Czech Republic and Brazil.

It meant the sum of the scores generated on all 32 by the model had increased sharply to 2_234 from 1_744 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 crunches 8 key indicators on a country s FX reserves_ exchange rate_ financial health and interest rates to give an overall score.

Based on data from 61 different EM currency crises since 1996_ Nomura estimates that a score above 100 indicates a 64% chance of a currency crisis in the following 12 months.

Egypt_ which has already devalued its currency heavily twice this year and sought an International Monetary Fund (IMF) programme_ now generates the worst score at 165.

Romania is next on 145 having been propping up its currency with interventions. Default-stricken Sri Lanka and currency crisis-regular Turkey both generate scores of 138_ while the Czech Republic_ Pakistan and Hungary notch 126_ 120 and 100 respectively.