Moody’s Investor Service, on June 20, 2018 reaffirmed Pakistan’s local and foreign currency long-term issuer and unsecured debt ratings as B3. While reaffirming the credit rating, Moody’s has appreciated Pakistan’s robust growth potential, supported by ongoing improvements in energy supply and infrastructure which have the potential to raise economic competitiveness over time. The outlook has, however, been changed to Negative on account of factors which may impact the external account situation.
The Government is fully aware of the challenges facing its external account and short to medium term remedial measures are already being put in place. To curtail aggregate demand, interest rate has been enhanced by 75 basis points since January 2018. The added exchange rate flexibility is expected to contribute towards containing the current account deficit.As exports pick up, 13.3 percent increase in July-April period, and CPEC related imports peak out, the current account deficit is expected to peak this year and decline in the coming years.FDI and remittances have also rebounded with an increase of 2.5 percent and 3.9 percent respectively during current financial year.The Government has also successfully decelerated the import bill through imposition of regulatory duties on non-essential and luxury items. Following clearance from the Supreme Court of Pakistan, the recently announced Amnesty Scheme is also expected to bring additional inflows. The country has sufficient foreign exchange reserves to meet its obligations on account of external debt repayments.
The Government is fully committed to maintain sound policies with the aim of sustaining macroeconomic stability and accelerating economic growth. The growth trajectory achieved over recent years is testimony to the success of the Government’s reforms agenda. Heavy investments in the energy and infrastructure sectors under the China Pakistan Economic Corridor (CPEC), keeping inflationary pressure to levels below 4 percent, achieving fiscal discipline and introducing greater transparency are some of the highlights of the recent past.
The Government is, therefore, confident of the outlook on its external account.