On Tuesday, State Bank’s Governor Reza Baqir said through a press release that Pakistan’s outlook has been upgraded from negative to stable in Moody’s – an international credit rating agency. This is the result of policy makers’ tough decisions including exchange rate devaluation. The rating firm said that primary driver of rating action is the improved balance of payment, though foreign exchange buffers will be rebuilt with time.
Change from negative to stable credit rating is announced by Moody’s – international credit rating agency –on Monday
In the accompanying note the rating agency said, “Moody’s expects Pakistan’s current account deficit to continue narrowing in the current and next fiscal year (ending June of each year), averaging around 2.2 per cent of GDP, from more than 6pc in FY18 (the year ending June 2018) and around 5pc in FY19”.
“These steps have made our exports competitive, curbed expensive imports and given an incentive to domestic industries to compete with imports,” said the governor adding that it resulted in a sustained improvement in the current account which has been the key driver of the increase in SBP’s reserves net of liabilities.
“The increasing trend in the stock market is a sign of improvement in the market”, says Baqir
In October, the current account deficit has recorded its first surplus in 4 years. In recent months foreign exchange reserves have stopped declining, enabling their first increase in nearly 3 years. These developments are good signs and given hope to the government’s economic team that the critical deficits causing economy’s slide have finally been identified and reversed.
Baqir also said that though these market developments are good and welcome, it is critical that these emerging financial improvements should be translated to real gains for the lower & middle income classes.
“These sections of the society have borne the bulk of the burden of adjustments from higher income taxes deducted at source for salaried workers, higher indirect taxes, and higher inflation.” While discussing the rising inflation the governor commented that reasons behind the inflation has partly been restoration of exchange rate, unforeseen food supply disruption as well as increase in administered prices.
He added that for further improvements in situations; the constraints on making private investment, as reflected by ease-of-doing business indicators, have to be further addressed to stimulate private job creation & eventually raising incomes.
The governor said “It is equally important to address food supply disruptions and curtail hoarding in food markets to bring down prices”.
Strengthening the economy and building the image of Pakistan in International Markets has been priorities of Pakistani Government and PM’s personal involvements in the initiatives have made this possible to much extent. Though it is a long journey ahead however, the review by IMF mission, agreements with World Bank and other alike achievements are result of the government measures for development projects and in the ease of doing business. Let us hope for good!