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Pakistan’s economy is stable: Moody’s

Says economic performance will remain positive in 2021

SAMAA | - Posted: Aug 8, 2020 | Last Updated: 11 months ago
Posted: Aug 8, 2020 | Last Updated: 11 months ago

Photo: AFP

International rating agency Moody’s has evaluated Pakistan’s economy and said it is stable. It has maintained Pakistan’s B3 rating.

Moody’s is known as a credible provider of credit ratings of countries. Its credit ratings show the economic strength of a country. 

It has forecast that Pakistan’s economic output will remain positive in 2021. Moody’s also said Pakistan has made improvements in various economic sectors, which will have a positive impact. The report said the economic growth rate is likely to be around 1 to 2%.

According to the agency, tax revenue has declined due to the coronavirus but is expected to increase. The debt burden on the government has increased but risks have been reduced with the help of international financial institutions. The report welcomed the reduction in the current account deficit and flexibility in the exchange rate.

Moody’s added that the IMF programme will meet external financial needs for the next one to one-and-a-half years. Economic activities are expected to be stagnant for some time, but it is expected to improve.

The report also said that the current account deficit is projected to remain at 2% this year. Interest rates are expected to adjust to the rate of decline in inflation. The debt burden is at a high level of 90% of GDP this fiscal year. The fiscal deficit is expected to be between 8% and 8.5% of the GDP.

Moody’s reports that Pakistan is facing the negative effects of climate change. Monsoon rains could affect the agricultural sector while droughts or floods could cause economic and social damage.

Moody’s also acknowledged that there has been an improvement in governance in Pakistan, signs of improvement in the rule of law and control of corruption. The government is also working to reduce poverty through the Ehsaas programme. But the report stated that access to basic services such as quality healthcare, education, electricity and water is limited.

It is pertinent to note that Moody’s had started reviewing the downgrade of Pakistan’s approach to deferring loans from G20 countries. However, given the improvement in the situation, a stable economic outlook has been maintained.

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