In its annual credit analysis of the Pakistan’s economy, Moody’s has given the current government a B3 rating with a stable outlook. B3 is one of the lowest investment rating with likelihood of default and assigned to a security. A security with a B3 is considered speculative. Ironically, B3 rating is being regarded in positive sense which is given to the Pakistan’s economy by the rating agency on account of ‘strong economic growth and reduction in fiscal deficits’. Moody’s Investors Service has claimed that the strong growth performance, reduction in fiscal deficit and improved inflation dynamics underpinned the government’s B3 rating with a stable outlook. However, counting the negative aspects of the economy, the agency notes the government is facing the challenges of high general debt burden, weak physical and social infrastructure, a fragile position of external payments, and high political risk. It says the government weighs on debt affordability due to narrow revenue base, because inflow of exports and remittances have slowed down and capital goods imports have risen. This has resulted in renewed pressure on the external accounts.
The agency notes the prospects for growth have improved after successful completion of a three-year Extended Fund Facility programme of the International Monetary Fund and the construction of China-Pakistan Economic Corridor. Despite low revenue base and fall in the amount of remittances sent by the expatriate Pakistanis, the corridor project has the potential to modernize the economy of Pakistan. The CPEC project is the game changer and development of infrastructure will transform and stimulate the economy by inflow of both local and foreign investment. However, renewed pressure on the external accounts and lack of fiscal consolidation have curtailed the rating, said the ratings agency. According to a senior official of the rating agency, implementation of economic reforms and increased inflow of foreign investment have brought macroeconomic stability to some extent and has been pushing the growth in the gross domestic product since 2013. However, pressure on the external accounts continued due to piling up debts. The stable outlook means upside and downside risks to the sovereign credit profile. The support from lending agencies has upgraded foreign currency reserves of the country and has fostered progress on economic reforms.
The international rating agencies off and on fires warning shots. Instead of struggling for local and foreign investment, the government banks all its hopes on new loans from donor agencies. May be the nation is still unprepared to absorb the changing perspective of the national economy.
