LONDON: Nomura has warned that seven countries — Egypt, Romania, Sri Lanka, Turkiye, Czech Republic, Pakistan and Hungary —are now at a high risk of currency crises.

The Japanese bank 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 per cent 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.

Published in Dawn, November 23rd, 2022

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Disregarding CCI
Updated 04 Nov, 2024

Disregarding CCI

The failure to regularly convene CCI meetings means that the process of democratic decision-making is falling apart.
Defeating TB
04 Nov, 2024

Defeating TB

CONSIDERING the fact that Pakistan has the fifth highest burden of tuberculosis in the world as per the World Health...
Ceasefire charade
Updated 04 Nov, 2024

Ceasefire charade

The US talks of peace, while simultaneously arming and funding their Israeli allies, are doomed to fail, and are little more than a charade.
Concerning measures
Updated 03 Nov, 2024

Concerning measures

The govt must seek political input and consensus on the changes it is seeking to make and be open about its intentions.
Short-lived relief?
03 Nov, 2024

Short-lived relief?

POLICYMAKERS must be jumping with joy. At the close of the first quarter of FY25, the budget posted a consolidated...
Brisk spread
03 Nov, 2024

Brisk spread

THE surge in polio cases has reached distressing levels with a tally of 45 last reported, after two cases emerged in...