Fitch Ratings has appreciated the stability of the Pakistani rupee against dollar even during the troubled times, but expresses dismay over rapid fall in the foreign exchange reserves. In its latest report on the financial state of the economy, it says the State Bank of Pakistan kept the rupee stable against dollar during its periods of appreciation. The ratings, an international ratings agency providing issuer and bond ratings, and research banks, corporations, sovereigns, structured and municipal finance, points out a sharp depreciation of the rupee now. However, it says that recent fall in foreign-exchange reserves and widening of the current account deficit are manageable and will not deteriorate international financing conditions of the country. Though the independent economists have always expressed reservations over the three-year IMF programme that ended in September last year, the agency report appreciates the help from the donor agency in bringing general macroeconomic stability. It says that despite sharp decline in foreign reserves, the country would not face external-financing difficulties.The real time problems facing the economy is the current accounts deficit which showed marked raise in the third quarter of the current financial year and crossed $2.6 billion.
On another note, the remittances sent by expatriate Pakistanis are declining, oil prices are rising in the international market and imports associated with infrastructure projects have significantly increased, adding external pressures on the financial health of the country. Fitch believes the State Bank has been keeping the rupee stable against the dollar for the last one and half years, and increase in deficit will not affect the international financing obligations of the country. The rating agency sees little chances in the widening of the current-account deficit in the near future and financing of the development project by China will offset the effects of deficit due to import of equipment and machinery related to the China Pakistan Economic Corridor projects. The agency affirmed Pakistan’s rating at ‘B’ Stable in February but feared that higher capital imports and gradual recovery in energy prices will further widen the current-account deficit.The government will have to make hard choices as regional stability is being jeopardized by the eternal enemy of Pakistan, India, and it will definitely affect the flow of direct foreign investment in the country. Apart from economic cooperation, a defense cooperation with China is need of the hour. The appreciation from the Fitch Ratings’ for strong rupee is commendable as strong currency is the indication of a stronger economy.
