ISLAMABAD, Sept 19: Pakistan’s external vulnerability index has significantly improved and now stands at 38 per cent and is better than many other developing countries.

According to latest Moody’s International assessment made available to Dawn here on Friday, Pakistan now fares well compared with 51 per cent of India, 59 per cent of Indonesia, 573 per cent of Uruguay, 142 per cent of Brazil, 43 per cent of Rumania, 212 per cent of Turkey, 53 per cent of Vietnam, 88 per cent of Philippines and 75 per cent of Russia.

The prominent world credit rating agency said that in a group of several other developing counties of Asia, Europe and Latin America, Pakistan’s external vulnerability index has improved during the last few years.

As far as external debt-to-GDP ratio is concerned, Pakistan’s position is also better than many other developing countries. As against Pakistan’s external debt-to-GDP ratio of about 50 per cent, the ratio of countries like Bulgaria, Turkey, Lebanon, Indonesia and Philippines is much higher. In this behalf, the Moody’s International places Pakistan close to Brazil.

According to the credit rating agency, different international banks and investment houses are of the view that Pakistan is no more vulnerable as it used to be a few years ago as far its debt-to-GDP ratio is concerned.

Pakistan’s external debt and foreign exchange liabilities have now been reduced to $35 billion from $38 billion in 1999. Most importantly, the burden of external debt has been reduced significantly from as high as 335 per cent of foreign exchange earnings to 187 per cent by the end of 2002-03.

Simultaneously, the Moody’s International said that on public debt side, it has been reduced from 110 per cent of GDP to 90.5 per cent in 2002-03.

Going forward with a build-up of foreign exchange reserves of more than $11 billion, Pakistan government appears to have expanded its debt reduction strategy by including the pre-payment of expensive debts. The government is expected to continue keeping both the fiscal and trade deficits under control and that the cost of borrowing both external and internal are likely to remain substantially low. Under this assumption, external debt and liabilities are projected to decline to around $33 billion by the end of the current financial year and will further decline to the extent of pre-payment of expensive debt.

As far as external debt burden is concerned, it is likely to decline 160 per cent from the last year level of 187 per cent. During the medium term, many analysts suggest that Pakistan would achieve debt sustainability much ahead of the time proposed in the draft fiscal responsibility law. Draft law envisages the public debt-to-GDP ratio should decline to 60 per cent by 2020.

Analysts also suggest that Pakistan can achieve debt sustainability, provided it continues to follow the macroeconomic policies currently being pursued.