Credit upgrading

There is some consolation on the economic front as Pakistan's locus standi stands improved on the credit index. Moody's, one of the world's top three rating agencies based in New York, has upgraded it to the speculative rank of Caa1. That is an assured placing out of the default horizons where the beleaguered economy had been hovering for two years. The supra-auditors believe that macroeconomic as well as debt affordability indicators are improving.

Yet, the investment grade remains in troubled waters as the country cannot issue international sovereign bonds, primarily owing to riskier credit ratings that often lead to double-digit interest rates. The cheers, nonetheless, are worth lauding and are in need of being graduated to stable citations.

Moody's has acknowledged the overall improvements in the country's external and fiscal positions, and this should lead to currency stability and an inflow of FDIs. The misery is that Pakistan is faced with debt repayments to the tune of $50 billion in the next two years, and it is a daunting task to overcome. The only major source of forex are remittances worth $30 billion, whereas the graph of expectancy from exports is unpredictable as plum industries such as textile are in doldrums. Thus, the conventional option left is to refinance the old debts and seek bailouts from lenders. This needs to be fixed if the economy has to gain a sound footing in the long run.

However, the optimism expressed by Moody's is a shot in the arm as the agency has praised the revenue generation policy and is satisfied with the rise in share of taxes to 16% of GDP from 12.6%. Thus, it does not see a default in years to come, provided there is compliance with the IMF prescription. With the economy predicted to grow at 3.6% and forex reserves dwindling, it's time for the government to look inward and set in a semblance of fiscal prudence, reinvigorate the SMEs, opt for actionable austerity and not gimmicks, and work for lifting people from the poverty line. That is how it can overcome the prevalent social degeneration as well as budgetary distress.