I had forecast a collapse in the Pakistani rupee to a 160 – 180 range against the US dollar and a plunge in the Karachi stock market index to 32000 after PMLN Prime Minister Nawaz Sharif was sacked by the Supreme Court at the behest of the Rawalpindi GHQ/deep state in July 2017. At the time, the rupee was grossly inflated in a dirty peg at 105 and the Karachi 100 index even made all-time highs at 52000. I immediately sold my entire Pakistani equities exposure and narrowly avoided getting skinned alive in a US dollar adjusted 70% ghastly currency/stock market collapse, unlike so many of my “long and wrong” compatriots in Dubai, led by prominent bankers, property spin masters and hawala kings.
The Pakistani rupee plunged again last week to 157 in a spasm of panic selling in local foreign exchange markets. The sudden arrest of billionaire-politician Asif Zardari, a former President of Pakistan and Nawaz Sharif’s nephew Hamza Shahbaz Sharif has spread panic among the Pakistani elite. Imran Khan’s PTI government has launched a draconian anti-corruption campaign that has already ensnared member of the Sharif and Bhutto-Zardari clans, Pakistan’s two political dynastic families. The Jinnah clan had no chance to make serious money in Pakistan other than the members who stayed put on the other side of the Radcliffe Award. I know – he was my ancestral kinsman.
Even though Islamabad insists that the free fall of the rupee had nothing to do with current negotiations to obtain a $6 billion IMF loan to defuse Pakistan’s balance of payments time bomb, the capital markets are convinced that State Bank of Pakistan (SBP) governor Dr. Reza Baqir, a former IMF resident economist in Cairo who engineered the epic November 2016 devaluation of the Egyptian pound, has capitulated to the diktat of the Bretton Woods twins in Washington and accelerated the devaluation path of the rupee. Ironically, the IMF was not satisfied with the 35% fall in the Pakistani rupee’s exchange rate in the past year, making it Asia’s worst performing currency.