Pakistan’s currency could be weakened as soaring energy and commodity prices worsen the country’s current account deficit, Deutsche Bank AG chief says, referring to the broadest measure of trade, a report published in Bloomberg declared.
“This is a major concern for the economy and for the business community,” the bank’s country manager, Syed Kamran Zaidi, said in an interview. “That’s obviously something banks are also cautious about.”
The report said Pakistan saw its energy bill reach $13 billion in the first eight months of the year which started in July, more than double the same period last fiscal year, according to government data.
Read more: Rupee slips below 180 against the dollar
“Costs could rise further as oil prices have since topped $100 a barrel due to supply issues following Russia’s invasion of Ukraine,” he added.
A weaker rupee could be among the factors pushing the central bank to raise borrowing costs, Kamran added, estimating that the benchmark target rate should rise between 50 and 100 basis points in upcoming meetings, after remaining unchanged from the previous two.
“The market has already priced in this change, as evidenced by the secondary market yields of treasury bills and Pakistan investment bonds” which reflect both short and long-term instruments, he said.
According Bloomberg, Pakistan’s short-term bond yields have risen by at least 150 basis points over the past month, according to central bank data. Meanwhile, the Pakistani rupee slipped for a seventh day to a record high of 181.73 to the dollar on Tuesday.
Read also: The fall of the rupee continues in the interbank
Last month, the current account showed a deficit of $545 million, narrower than the record deficit of $2.5 billion in January, but still more than 16 times larger than the same month last year, according to central bank data.
“Pakistan will be in good shape in the longer term, thanks in part to rising exports, and that many multinational companies are bullish on the country and a few rank Pakistan among their top five destinations. At least two of these companies are planning new factories in Pakistan, Kamran added.
The story originally appeared in Bloomberg.