According to newspaper reports, Standard and Poor’s has revised the projections for the Pakistan’s economy by raising its outlook on the country’s long-term ‘B-‘ credit rating to ‘positive’. However, the world ratings service has warned that security risks will continue to threaten the policy responses of the government. Standard and Poor’s has revised the projections on the basis of average real gross domestic product growth from 2015 to 2017 and from 3.8 percent to 4.6 percent. The report says that it is expected that the per capita GDP will increase by 4.3 percent to about $1,460 this year, from 5.4 percent in 2014 as S&P affirms Pakistan’s ‘B-‘ long-term and ‘B’ short-term sovereign credit ratings.
However, its analysis says that internal and external security risks will continue to threaten the governmental and institutional effectiveness. The Pakistan Army has launched operation against terrorists in the tribal areas and another operation against criminals in Karachi. There are various political expediencies which had so far barred the successive governments to take a decisive action in Karachi, but now Chief of Army Staff Raheel Sharif wants to clear the mess piled up in the country for decades. The political government has now little option to stop operation in Karachi which is the commercial hub of the country. However, the rating agency says that material risk of domestic conflict and social upheaval will continue to challenge policy responses.
On another note, lack of transparency and governance, corruption and nepotism bulldoze the government halfhearted efforts to bring stability in policymaking and political institutions. The projections says that the country’s GDP per capita is likely to average 2.6 percent from 2015 to 2019 due to strong economic indicators in agriculture and construction sectors. However, inflation is expected to stay at 4.8 percent during the next four years.
According to data of inflation monitored by the State Bank of Pakistan, starting October 2014, year-on-year consumer price index inflation not only showed a downward trend but it is also expected to decline in 2015. Inflation is contained at 2.1 percent in April 2015 from 2.5 percent in the preceding month due to lower fuel and food prices. The favourable projections have been attributed to improved collections and tightened expenditure mainly in line with International Monetary Fund reforms. The government has so far adopted a cautious approach toward economic reforms, but has little choice to linger on. The world is going forward at a fast rate and the government will have to keep up the pace with it.
