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

Judiciary’s SOS
Updated 28 Mar, 2024

Judiciary’s SOS

The ball is now in CJP Isa’s court, and he will feel pressure to take action.
Data protection
28 Mar, 2024

Data protection

WHAT do we want? Data protection laws. When do we want them? Immediately. Without delay, if we are to prevent ...
Selling humans
28 Mar, 2024

Selling humans

HUMAN traders feed off economic distress; they peddle promises of a better life to the impoverished who, mired in...
New terror wave
Updated 27 Mar, 2024

New terror wave

The time has come for decisive government action against militancy.
Development costs
27 Mar, 2024

Development costs

A HEFTY escalation of 30pc in the cost of ongoing federal development schemes is one of the many decisions where the...
Aitchison controversy
Updated 27 Mar, 2024

Aitchison controversy

It is hoped that higher authorities realise that politics and nepotism have no place in schools.