Debt-ridden Pakistan’s policy continuity in doubt, says Moody’s Investors Service

ISLAMABAD: Moody’s Investors Service has highlighted cash-strapped Pakistan’s “significant uncertainty over policy continuity” and falling foreign exchange reserves even as the Pakistan Stock Exchange and the rupee made a steep recovery after Shehbaz Sharif was sworn-in as the new Prime Minister, bringing to an end the political uncertainty in the country.
However, the New York-based credit rating agency forecast a stable outlook for Pakistani banks and estimated the country’s gross domestic product (GDP) growth rate to remain between three and four per cent, the Dawn News reported.
Commenting on the ouster of former prime minister Imran Khan through a no-confidence vote and the subsequent confirmation of Sharif as the country’s new premier until August 2023, Moody’s said that “the political upheaval reflects the volatility that besets Pakistan’s political environment and raises significant uncertainty over policy continuity, at a time when Pakistan is encumbered with surging inflation, widening current account deficits and declining foreign-exchange reserves”.
It said it was unclear how the new government would approach the International Monetary Fund’s (IMF) programme during this interim period before the next election is called, prolonging the uncertainty around whether Pakistan would be able to secure financing from the IMF to bolster its foreign-exchange reserves, which have fallen to a level sufficient to cover only about two months of imports.
Meanwhile, it said the banks’ stable outlook was supported by an expanding economy and their sound finances and hence maintained a stable outlook for the banking sector (B3 stable). Moody’s expected real GDP growth of between 3 per cent and 4 per cent for the ongoing fiscal year and between 4 per cent and 5 per cent for the 2023 fiscal year, with credit growth surpassing 12 per cent. —PTI

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