Pakistan’s decision to start bailout talks with the International Monetary Fund is the latest in a series of threats to hit emerging markets that have been challenged by weakening currencies and rising U.S. interest rates.
While Pakistan has unique issues, including a ballooning trade deficit and ambitious infrastructure program, the stronger dollar and higher U.S. rates more broadly are leading capital to flow out of emerging markets. That has caused financial strain, including challenges paying off U.S. dollar debt and pressure on developing-economy stock markets.
Fears of a broad emerging market crisis emerged in May, when the Argentine peso fell so sharply that the nation sought a bailout from the IMF. The Turkish lira, falling throughout the year, tumbled in early August.
Pakistan’s Finance Minister Asad Umar will begin negotiations at the annual meeting of the IMF in Bali, Indonesia, this week, Pakistan’s Finance Ministry said Monday.