ISLAMABAD: In a policy note on Monday, Global rating agency Moody’s cautioned that growing tensions between India and Pakistan would affect the latter’s economic stability.
The rating agency stated: “Sustained escalation in tensions with India would likely weigh on Pakistan’s growth and hamper the government’s ongoing fiscal consolidation, setting back Pakistan’s progress in achieving macroeconomic stability.”
It said Pakistan’s economy had been showing positive signs lately with inflation coming down and foreign exchange reserves going up amidst a marked progress in the International Monetary Fund programme.
However, it added a continued rise in tensions could also hamper Pakistan’s access to external financing and pressure its foreign exchange reserves, which remain well below what is required to meet its external debt payment needs for the next few years”.
“India and Pakistan’s diplomatic relations have deteriorated,” the agency said. Mentioning the latest move by India, the agency said its action to put the IWT in abeyance could severely reduce Pakistan’s water supply.
On India, Moody’s said its economy would remain stable powered by “moderating but still high levels of growth amid strong public investment and healthy private consumption”.
“In a scenario of sustained escalation in localised tensions, we do not expect major disruptions to India’s economic activity because it has minimal economic relations with Pakistan,” it said.
