The New York-based rating agency, Standard & Poor’s, has maintained the long and short-term rating of Pakistan at B, with a downward expectation on the external-sector performance. In its latest dossier, the company believes the stable outlook reflects that external and fiscal metrics of the country will not materially deteriorate from their current level. The country’s economic prospects will remain favourable but further fiscal consolidation could be a challenge in the wake of not up to the mark performance by provinces and due to general elections in June 2018. The agency pointed out that chronic issue of narrow tax base has not only adversely affected the business environment, but also policymaking and reform process in the country and this situation will continue until the formation of the next government after elections. When the company believes in the favourable economic prospects of the country, it lowers its expectations for a couple of years due to surge in imports. However, investment in energy and infrastructure projects would benefit Pakistan with robust growth. The agency could raise rating if the security environment is improved and it strengthens fiscal and external positions of the country.
On another note, the ratings will be lowered if the current infrastructure investment fails to yield positive results on macroeconomic stability.The agency hopes that political changes will not lead to economic chaos as it will not affect the institutional and economic profile of the country in the current business environment. The major issues hindering the foreign direct investment are low income generation, inadequate infrastructure and security risks, but Standard & Poor’s expects the government to keep its policies unchanged. Ironically, the agency believes that the International Monetary Fund’s three year extended facility programme has helped restore macroeconomic stability and reduced the fiscal and external vulnerabilities.The programme has also supported the reforms that have the potential to spur economic growth and improve living standards of the people.
The agency has estimated GDP per capita of the country at $1,500 and forecasted annual GDP growth to average 5.7percent for the next three years thanks to large-scale investment in the corridor project. However, the fast-growing population has the potential to reduce the per capita income during the years in review. Apart from political situation, hostile neighbours on the west and east sides of the country are a nuisance and are possible bottlenecks to foreign direct investments. There is a need to support a strong political set up in the country and this can only be done none by others, but politicians themselves.
