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Pakistan: Latest currency devaluation a stopgap

The latest devaluation in the Pakistani rupee has once again put the spotlight on the country’s precarious external position. The government will hope to keep the situation under control until next month’s general election is out of the way, but Pakistan will soon be forced to either let the currency weaken much further, tighten monetary policy aggressively, or make another loan request from the IMF. None of these are attractive options, and whichever is taken, growth is likely to slow sharply.

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