A Thread: As a journalist, imagine you want to assess external sector outlook of your economy, try to concentrate these important ratios (compute these with actual data and compare them with their thresholds):
1) Short Term Debt (% of Exports), [Safe Side <= 3.5%]
(1/N)

2) Tot External Debt (% of exports), [Safe Side <= 215%]
3) Tot External Debt (% of F.Reserves), [Safe Side <= 250%]
4) Total External Debt (% of GDP), [Safe Side <= 32%]
5) Current Account (% of GDP), [Safe Side <= 3%]
6) Misalignment (%ch from Equilib REER), [Safe Side <= 6.5%]

Other than these ratios, an important “rules of thumb” for foreign reserve adequacy guides us that poor countries should hold Foreign Reserves covering 100 percent of short-term debt or the equivalent of 3 months worth of imports.
(3/N)

External account is connected with the domestic fiscal account, therefore, one may also look at the following key ratios:
7) Fiscal Deficit (% of GDP), [Safe Direction: <=4.5%]
8) Primary Budget Deficit (% of GDP), [Safe Direction: <=1.5%]
9) Domestic Debt (% of GDP), [<=60%]

Always, focus on this BOP identity:
CA (visible Trade account and non-visible accounts like remittances and other transfers ) + Capital/Financial Account (FDI/PI, Loans, Grants, etc) + Net Errors and Ommissions + ΔForeignReserves=0
(5/N)

with BOP identity in your mind, now imagine a COVID type scenario, where exports are falling (imports are also falling but at a slower pace), remittances are also falling, FDI remains the same and hot money outflows, in this case, net pressure will be on foreign reserves (6/N)

Now, if external account is already in a vulnerable situation (with weak domestic fundamentals, low (-ve) economic growth, large fiscal deficit, high debt to GDP ratio, etc...), any decline in foreign reserves will result in a pressure type situation to your local currency (7/N)

Weak economic fundamentals always create uncertainty and panic type situations, and market players start taking positions against local currency (mostly in $) for speculative motives. As govt decides to revive economic activity, it face shortage of foreign currency in the market.

The problem becomes more prominent in a case where central bank artificially maintains exchange rate a certain level (overvalued currency). Having weak economic fundamentals, any adverse Economic/Pandemic shock will result in a collapse of local currency (Currency Crisis).

Our currency is keep loosing its value. ER will soon cross 170. Although, SBP has taken many appropriate measures to tackle the situation. But, without aggressive reforms, these measures will be redundant. In the absence of reforms, we will face similar situations again and again