Moody’s Investors Service, a US credit rating agency, has assigned B3 rating to dollar-denominated international bonds issued by the government last month to raise $2.5 billion revenues and bolster the falling foreign exchange reserves of the country. An international bond is considered investment grade if its credit rating is B3 and is likely enough to meet payment obligations. In that case, the banks are also allowed to invest in them. Moody’s hope the continued reforms by the government would help tap robust growth potentials. The rating agency also believes the B3 reflects a credit profile that balances robust growth potential and a relatively large economy. However, it has appreciated the reforms process which was started under a three-year extended facility program of the International Monetary Fund. The agency also supported the development of infrastructure under the China-Pakistan Economic Corridor project. The country received $1.5 billion via 10-year notes at 6.875 percent and $1 billion through five-year sukuk at 5.625 percent to arrest the declining foreign exchange reserves. Reports suggest Standard and Poor’s, another US based rating agency, had assigned preliminary ‘B’ long-term rating to the international bonds issued by government.
The rating agency has also warned the government against fallout of rising debt burden, narrow income generating resources, poor external payment position and risky credit profile amid balance of payment issue facing the nation. Though the country is expected to have record growth in its gross domestic product, but limited revenue resources will have adverse effect on the economy. The scale of the Pakistani economy is large, but per capita income is very low, showing that the country has limited capacity to absorb economic shocks. Unfortunately, the much advertised reforms are limited to increase tax ratio to generate money to pay back loans to the International Monetary Fund. Finance Minister Ishaq Dar is not tired of praising the government’s commitment to implement reforms to support fiscal and monetary policies. However, it is yet to be seen how the government preserves the gains of so-called macroeconomic stability. The country is passing through political instability which is increasing day by day due lack of interest of the government officials who matter. Some politicians are demanding fresh elections to deal with the situation but the people are the ultimate losers in the fight between political parties.
