TWO separate credit rating agencies have released their assessments of Pakistan’s economy in back-to-back releases, and they are both saying more or less the same thing: despite some steps taken by the government, the economy continues to drift towards crisis.

Contrary to the assertion of the finance minister that Pakistan is now in the clear regarding its external financing requirements, both agencies point to rising external debt and falling foreign exchange reserves as the key threats to the economy.

Both agencies see the growth rate falling between 4.2pc and 4.7pc this year, and both agree that an improved security environment and infrastructure investments made by the previous governments will support growth in the medium term.

They also praise the government’s ambitious reform agenda, but point to significant “implementation challenges”, effectively saying that making good on promises will be a lot more difficult. Moody’s reaffirmed the country’s rating but Fitch actually downgraded it by one notch.

Fitch also explicitly says an IMF programme will help the government’s chances of improving its rating, because it would help unlock financial inflows from multilateral lenders and global capital markets.

Despite the government’s best efforts to put a positive spin on its efforts to stabilise the markets thus far, it seems the markets remain sceptical and that far more action is going to be required in the weeks and months to come.

It seems the government developed cold feet at the very outset of the stabilisation programme, and is counting far too much on help from a few ‘friendly countries’, instead of taking a cold hard look at the policy reforms required to put the economy on a sustainable footing.

The ratings agencies, the debt markets and the State Bank all seem to be pointing towards the need for further stabilisation, and all seem to be asking about some sort of policy direction or a transformative vision for the economy.

Friendly countries can pull the economy from the brink for the moment, but they cannot advance reforms in a way that would ensure it does not fall back into the abyss. Only the government can do that.

Unfortunately for the latter, there is no painless and easy road towards achieving this objective. The road of reform is hard, but it must be walked if the PTI is to deliver on any of its commitments.

Published in Dawn, December 16th, 2018