NEW YORK (Reuters) – Pakistan’s dollar-denominated bonds took a hit on Monday, along with its currency and stocks, after the government announced it was considering legal action against former prime minister Imran Khan.

Securities maturing in April 2024 fell, widening their yield premium over equivalent US Treasuries by more than 92 basis points to 2,825, according to indicative price data collected by Bloomberg. Spreads on other notes, including the 2031 and 2051 debt issued last year, have also widened, although they remain well below their July highs. The rupee fell 0.9% to 216.66 to the dollar, according to central bank data.

The political drama threatens to undermine Pakistan’s quest to convince the International Monetary Fund to release $1.2 billion in funding at a board meeting later this month. The country has already secured $4 billion in pledges from friendly countries like Saudi Arabia, Qatar and the United Arab Emirates to fill its financing gap as it faces foreign currency reserves defaulting and one of the fastest inflation rates in Asia.

“Pakistani assets (eurobonds and equities) are unquestionably cheap,” Tellimer strategist Hasnain Malik wrote in a note on Monday. “But there’s little chance of getting help from a drop in domestic political temperatures anytime soon.”

At a press briefing on Sunday, Interior Minister Rana Sanaullah said a speech by the former prime minister continued a trend by Khan to target the military, judiciary and police and aimed to threaten the responsible and prevent them from carrying out their duty.

Pakistani politics are heating up ahead of an election due to be held next year. Khan has campaigned for the first polls since his ousting earlier this year, betting voters back his claim that Prime Minister Shehbaz Sharif and the Pakistani military conspired with the United States to remove him from power – an allegation which all three have denied.

Meanwhile, the country’s central bank announced on Monday that it was keeping its lending rate unchanged at 15%, in line with expectations of analysts polled by Bloomberg. Last month, S&P Global Ratings cut Pakistan’s credit outlook from negative to neutral as the country’s external position weakens amid rising commodity prices, a depreciating rupee and tighter global financial conditions. . This followed similar actions by Moody’s Investors Service and Fitch Ratings.