In its recent announcement, Fitch Ratings has downgraded the outlook on Pakistan’s long-term foreign and local currency issuer default ratings to negative and has affirmed ‘B’ rating on the grounds that the gains that the country had made under three-year extended fund facility programme of the International Monetary Fund had been partial reversed. The loan programme was completed in September 2016 to boost foreign currency reserves and achieve microeconomic stability. However, the government failed on both the accounts. The foreign exchange reserves have come down to $17 billion and microeconomic stability has lost somewhere in the middle of political polarization. Though Fitch ratings are mere predictions about future events which could not be verified as facts, its calculations are based on official and non-official documentation which it collects from independent auditors, attorneys and other experts to produce issuer default ratings. The findings of Fitch Ratings give the fund managers a chance to outlook into positive and negative aspects of the economy. Unfortunately, the assessments presented by local think-tanks and foreign rating agencies are never taken seriously by policymakers.
The government has already floated international bonds to alleviate pressure on finance and economy, but experts look Pakistan as the potential customer of the International Monetary Fund. Soon after assuming the office, the government of the Pakistan Muslim League-Nawaz sought a loan of $6.2 billion under the programme to help prop up shrinking foreign currency reserves. But the step fired back as the government has failed to stop depreciation of the local currency, tax rebates on exports and rationalise import duties of non-essential goods. On another note, the country is passing through political uncertainty, which prevents the government from taking any long term decision. Fitch predicts the overall reserves of the country could fall to $16.8 billion at the end of the current fiscal year from $22.6 billion two years ago. It says the reserves could further fall if rupee remains stable and macroeconomic policies are tightened to restrain imports. The policymakers so far could not bring the volume of major foreign exchange earning sector, exports, to the desired level and the current account deficient remained the major cause of decline in the reserves. The government should have to focus on export-oriented industry to create jobs, earn foreign exchange and stabilize the macro economy, but it is running here and there without claiming any positive results.
