Pakistan’s economic output rising at healthy pace

Published: April 28, 2016
But country’s debt burden and political risks are high. PHOTO: INP

But country’s debt burden and political risks are high. PHOTO: INP

KARACHI: Moody’s Investors Service said on Wednesday Pakistan’s B3 issuer rating balances the strengthening growth and progress on structural reforms against a relatively high government debt burden and political risks.

Moody’s conclusions are contained in its latest credit analysis titled “Government of Pakistan – B3 Stable”, which looks at the country’s credit profile in terms of economic strength (assessed as moderate), institutional strength (very low), fiscal strength (very low) and susceptibility to event risk (high).

Pakistan’s economy reaches pivotal point, medium term outlook positive: IMF

These represent the four main analytic factors in Moody’s sovereign bond ratings methodology. The analysis constitutes an annual update to investors and is not a rating action.

Moody’s assessment of Pakistan’s moderate economic strength encompasses the sovereign’s very low per capita income and the large size of its economy.

Economic output, previously anemic, has picked up over recent years and is now rising at a relatively healthy pace, the agency said. The implementation of the China-Pakistan Economic Corridor will likely support the activity further, and in concert with energy sector reforms, will improve the operating environment for investment, it added.

Moody’s assessment of institutional strength as very low reflects Pakistan’s weak but improving rankings on governance survey indices, specifically the World Bank’s Worldwide Governance Indicators. It also takes into account the central bank’s management of inflation and monetary policy, and progress on reforms under the ongoing IMF programme.

World Bank projects: Pakistan’s economic growth at 4.4%

Moody’s very low assessment of Pakistan’s fiscal strength reflects the country’s moderately large debt burden and weak revenue base, which lower the debt affordability relative to peers.

The share of foreign currency debt to total general government debt has considerably declined in the last five years. But such borrowing still comprises about a third of total public debt, leaving government finances exposed in the event of exchange rate depreciation or financial market volatility.

Moody’s assessment of Pakistan’s vulnerability to event risks as high is driven by political risks, both domestic and geopolitical.

The government’s relatively large annual borrowing needs, in particular owing to large rollover requirements, are also a constraint, Moody’s said.

Published in The Express Tribune, April 28th, 2016.

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Reader Comments (17)

  • Faisal
    Apr 28, 2016 - 10:06AM

    But as per PTI the government is doing nothing, the condition is worse then before, they are in the process to oust the current PM, then whom shall we trust moody or IK?Recommend

  • Hassan
    Apr 28, 2016 - 10:52AM

    @Faisal: what is so good about the report??? Moody’s conclusions are contained in its latest credit analysis titled “Government of Pakistan – B3 Stable”, which looks at the country’s credit profile in terms of economic strength (assessed as moderate), institutional strength (very low), *fiscal strength (very low) and susceptibility to event risk (high)*. Thanks to Army and China for their maturity and concerned about the CPEC which led to have some positive impact on over all economy, but if u like to see the real issues that is higher debt and their maturity, which makes our economy vulnerable, don’t fall for apparent picture but try to gauge the aftermath. Recommend

  • Hi
    Apr 28, 2016 - 11:37AM

    Clearly, IK is worried that if he let Nawaz Sharif continue, then by 2018 Nawaz will have done enough to get re-electedRecommend

  • Asad Ali
    Apr 28, 2016 - 11:42AM

    Don’t ever trust IK…Recommend

  • Parvez
    Apr 28, 2016 - 12:13PM

    This is like saying……..there were may discrepancies, many irregularities and inconsistencies, but by and large the elections were fair and represented the will of the people…… the local vernacular it called ‘ double speak ‘. Recommend

  • pervaiz
    Apr 28, 2016 - 2:13PM

    Please see half full glass at least and be positive if you are not follower of pti and if you are from pti then do what you like, people understand your grievances. As for China & Army what you mentioned their role in development, you know very well Army & China are not new but decades old characters then why not this current development in near future.Recommend

  • Umer Burney
    Apr 28, 2016 - 5:42PM

    Even the international organizations are appreciating current government’s economic policies. According to a cricketer turned politician, Pakistan will no longer be on the world’s map by 2018 if things go according to the current political leadership’s policies. Actually, he’s afraid that if Nawaz Sharif completes his tenure, he will be re-elected on the basis of his performance. What to say, for him, it was never about Pakistan.Recommend

  • bilal
    Apr 28, 2016 - 6:51PM

    All best on Pakistan progress is on ONE project. CPEC…..
    As important as the project is, the short term benefits are hardly any. Long term possibilities are a lot
    BUT till that happens, we need to manage our affairs properly. And in that both PPP and PMLN have failed miserably. Our huge debt is one such example to which the current Gov’t has no ability to resolve.Recommend

  • Humza
    Apr 28, 2016 - 6:53PM

    @Hassan: Can you not see Pakistan has not received such favorable reports in a long time. When international financial institutions see Pakistan’s economy improving but only worry about event risk, meaning political issues, this shows you the damage that Imran Khan and his type of supporter are doing to Pakistan. Imagine if the world started seeing Pakistan as one of those countries where governments are only voted in and out in a stable political manner and not through third world style dharnas? We have all seen the results of the Arab Spring and the masses of Arabs trying to smuggle themselves into Europe for asylum. Pakistan looks like a bright star compared to most Muslim nations by virtue of the democratic system.Recommend

  • Syedpk
    Apr 28, 2016 - 7:24PM

    partially agree with you I see the glass half full, the governance is way better than in PPP, but the comparison doesn’t do justice, comparing a Robber( who just takes away your money) with a dacoit (who along with valuable might casually take your life). If I had a dacoit in my house I would gladly wish for the robber instead, but that doesnt mean I wish that a robber comes.
    Going to you glass half full analogy, the problem is that the glass is forcibly kept half full, while the glass can go easily from half to 70% … Get my point ?
    (Disclaimer I am Apolitical) Recommend

  • buba
    Apr 28, 2016 - 10:08PM

    Improvement in Pakistan economy has the result of low oil prices – something the govt had zero to do with. The “stuff” that govt actually had control over – high debt, institutional strength, susceptibility to event risk were all rated very poor. Recommend

  • Tahir Iqbal
    Apr 28, 2016 - 11:47PM

    Carry on Mian Sahab..Recommend

  • observer
    Apr 28, 2016 - 11:49PM

    “Pakistan’s economic output rising at healthy pace”

    Deja vu? Didn’t we hear that from Shaukat Aziz and Musharraf while they were cooking the books to make it look rosy?Recommend

  • Sodomite
    Apr 29, 2016 - 12:06AM

    You make solid observations. Very little to applaud Pakistan for in Moody’s report. Those who can’t figure it out, is that our political and economic leadership are laundering money in suit cases and expect debt to show us the way. Illogical at best.Recommend

  • Parvez
    Apr 29, 2016 - 12:35AM

    @Syedpk: From a realistic economic point of view……….trust me the glass in not even a quarter full…..and its headed to downwards, to think otherwise is simply fooling oneself. Recommend

  • Ch. Allah Daad
    Apr 29, 2016 - 1:57AM

    This is only a beginning. After completion of next term of PML(N) government in 2023, Pakistan will be called an Asian tiger. Also we must not forget great sacrifices of our brave soldiers who have helped whole nation to turn the tide from poverty to prosperity. Recommend

  • Apr 29, 2016 - 4:30AM

    Good news indeed.Recommend

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