Ishaq Dar, Pakistan’s new finance minister, stated that he will attempt to control inflation while lowering interest rates on Wednesday. He also claimed that the currency was overvalued and promised a robust reaction to the country’s greatest economic crisis.
The chartered accountant is in his fourth year of employment and is dealing with a balance of payments crisis, foreign reserves that are barely enough to cover one month’s worth of imports, historic lows in the rupee, inflation that is over 27%, and the fallout from severe floods.
After being sworn in, Dar informed reporters in televised remarks, “We will manage inflation.”
He declared, “We will lower interest rates.” He made no mention of how he would lower rates while also calming price pressures.The Pakistani rupee was undervalued, according to Dar, who also issued a caution to currency market speculators. Compared to the US dollar so far this year, it has lost more than 30% of its value.
Dar, who is known to support currency market intervention to maintain the rupee’s stability, stated that “our currency is not at the level where it should be at this time, it is undervalued.”
“I’m hoping the traders will stop. I believe they already own it, as evidenced by the strengthening of the rupee “Added he. The Pakistani rupee cannot be played with by anyone.
On Wednesday, the price of the nation’s dollar-denominated government bonds hit a record low, indicating mounting default phobias.
According to Tradeweb statistics, shorter-dated issues saw the sharpest drop, with the 2024 bond offered at 40.2 cents on the dollar. While longer-dated maturities were offered at just over 36.6 cents in the dollar, bonds due in 2025 and 2027 dropped by just over 4 cents.
When compared to US Treasury bonds, the sovereign gap on the JPMorgan EMBI Global Diversified index increased to 2,442 basis points, setting new records for the premium investors paid to keep the bonds.