NEW YORK: Fitch Ratings, one of the three big credit rating agencies, has announced that Pakistan’s external finance pressures are still manageable – a welcome sign for the government that has been claiming all along that macroeconomic indicators have improved considerably over the past four years.
“Pakistan is unlikely to face significant external financing difficulties in the short term, barring an unexpected shock,” Fitch said and it did not see a significant deterioration in the country’s international financing conditions.
The assessment came in the backdrop of continued heavy borrowing by Pakistan government to meet expenditures and offset less-than-impressive increase in revenue collection.
On the contrary, Moody’s Investor Services, another big rating agency, predicted earlier this month that Pakistan’s external debt would grow to $79 billion by June this year – higher than initial estimates, and the country’s very weak fiscal strength was weighing on its ability to afford the ever-growing debt burden.
In its report, Moody’s said Pakistan’s challenges included a relatively high general government debt burden, weak physical and social infrastructure, fragile external payment position and high political risks.
Against government’s annual revenue estimate of Rs3.956 trillion, the collection in the first nine months (Jul-Mar) stood at Rs2.5 trillion or 62% of the target, according to the Consolidated Fiscal Operations summary of the Ministry of Finance. On the other hand, total expenditures of the government stood at Rs2.8 trillion or 63% of the annual target.
Fitch said the recent fall in Pakistan’s foreign exchange reserves and widening of the current account deficit were also manageable. On May 12, the foreign currency reserves held by the central bank stood at $15,895.9 million, decreasing $16.6 million from the previous week.
The reserves have dropped persistently over the past few months.
Apart from this, Pakistan’s current account deficit widened a massive 205% in the first 10 months (July-April) of the current fiscal year, standing at $7.25 billion compared to $2.38 billion in the same period of previous year, according to data released by the State Bank of Pakistan.
(With additional input from our Karachi correspondent)
Published in The Express Tribune, May 19th, 2017.