Karachi (January 09, 2018): Further depreciation in the Pakistani rupee against the US dollar is likely, given the likely evolution of the current account, which would raise financing costs and inflation short term, Moody’s Investors Service warns in its recently.
However, over the longer term, allowing the PKR to reflect currency fundamentals would reduce the drain on Pakistan’s (B3 stable) foreign exchange reserves and enhance the sovereign’s capacity to absorb shocks to trade and/or capital flows, the report states
The analysis is contained in Moody’s report titled ‘Government of Pakistan – Further currency depreciation would raise financing costs and inflation short term, enhance competitiveness longer term’.
According to the report, in the short run the country’s central bank will face the difficult challenge of anchoring inflation expectations at moderate levels and the government’s debt affordability will also likely weaken further.
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