Currency crisis.

NOMURA, a top financial services company based in Japan, has included Pakistan among seven countries threatened by a currency crisis, raising the perceived risk of default in the next 12 months. The other countries comprise Egypt, Romania, Sri Lanka, Turkiye, the Czech Republic and Hungary. The bank said 22 of the 32 states covered by its early warning index, Damocles, have seen their risk rise since May. The index is based on eight indicators that produce an overall score to assess the level of a country's vulnerability to a currency crisis. Nomura has called the situation an 'an ominous warning sign of the growing broad-based risk in EM [emerging market] currencies'. The report may sound alarming, but it isn't in fact. Although EMs remain more vulnerable, even the G7 economies show that all but Japan now have Damocles scores above the threshold led by America and Britain.

That Pakistan is included in the list is no surprise. Facing unprecedented balance-of-payments troubles over diminishing foreign exchange cover and drying dollar inflows, the country has been unable to control soaring inflation or rectify the weakening exchange rate. Limited fiscal space means the government is not in a position to help millions of flood victims by warding off hunger and disease, let alone begin reconstruction of...