FINANCIAL TIMES – After the nuclear heist in Pakistan two days ago, the UN Security Council proposed to temporarily cut off all international trade in the region in order to make sure that the missile would be unable to leave the region. The proposed trade embargo in the Presidential Statement riled up international markets as confidence in Pakistan’s ability to deal with such crises declined immensely.
The exchange rate of the Pakistani rupee collapsed from 1US/111PR to 1US/250PR overnight. Consultants tell the Financial Times that the collapse can be attributed to the hasty response of the UN Security Council. Financiers see the market reaction as indicative of a lack of confidence in the Pakistani government’s competence. The current nuclear crisis has buoyed such perceptions.
In the aftermath of a day’s trading, Pakistani trade prospects have dimmed. The restoration of confidence in the country’s financial markets appears to be a long-term endeavour. Last year’s Pakistani imports are calculated to value nearly 44 billion dollars. Current exchange rates, however, have strengthened projections that this number will shrink to 17 billion, already crippling an economy expected to face major shortages and high inflation.
The State Bank of Pakistan (SBP) recently announced new measures to cut down on the money supply in a move intended to curb the falling exchange rate, but rumors that Pakistani foreign reserves are dwindling have questioned the SBP’s capacity to truly stop the collapse.
Market observers signal that even if the UNSC decided to reverse its current proposals, harm has already been inflicted as international markets have spoken. Analysts agree that more cautionary deliberation may be needed in order to ensure that the fragile Pakistani financial system is protected. Hasty and ill-thought decision-making appears to have made a greater impact on economic stability than the UNSC initially considered.