Tough steps earn Moody’s outlook lift: SBP

Published December 4, 2019
Moody’s upgradation of Pakistan’s outlook from negative to stable is the recognition of tough decisions taken by the policymakers including the steep devaluation of exchange rate, said Governor Reza Baqir in a press release issued by the State Bank on Tuesday. — Photo courtesy British University in Egypt website/File
Moody’s upgradation of Pakistan’s outlook from negative to stable is the recognition of tough decisions taken by the policymakers including the steep devaluation of exchange rate, said Governor Reza Baqir in a press release issued by the State Bank on Tuesday. — Photo courtesy British University in Egypt website/File

KARACHI: Moody’s upgradation of Pakistan’s outlook from negative to stable is the recognition of tough decisions taken by the policymakers including the steep devaluation of exchange rate, said Governor Reza Baqir in a press release issued by the State Bank on Tuesday.

Moody’s – international credit rating agency – raised the outlook on Pakistan’s credit rating from negative to stable on Monday.The ratings firm said improvements in the balance of payments is a primary driver of the rating action, but added that foreign exchange buffers will still take time to rebuild.

“Moody’s expects Pakistan’s current account deficit to continue narrowing in the current and next fiscal year (ending June of each year), averaging around 2.2 per cent of GDP, from more than 6pc in FY18 (the year ending June 2018) and around 5pc in FY19,” the rating agency said in its accompanying note.

Commenting on the increase in the stock market, he said the rally is a reflection of the improving market sentiment and a growing reflection that the country’s finances are on a sustainable footing.

“These steps have made our exports competitive, curbed expensive imports and given an incentive to domestic industries to compete with imports,” said the governor adding that it resulted in a sustained improvement in the current account which has been the key driver of the increase in SBP’s reserves net of liabilities.

The current account deficit recorded its first surplus in four years in the month of October. Foreign exchange reserves also stopped declining in recent months, registering their first increase in nearly three years. The developments have given heart to the government’s economic team that the critical deficits that were responsible for the economy’s slide have finally been arrested and reversed.

Baqir said that while such market developments are welcome, it is critical to ensure that the emerging financial improvements are translated into real gains for the middle and lower income classes.

“These sections of the society have borne the bulk of the burden of adjustments from higher income taxes deducted at source for salaried workers, higher indirect taxes, and higher inflation.” The governor said the rising inflation has partly been a result of restoring exchange rate competitiveness, increase administered prices to reduce fiscal deficits in the public sector, and unforeseen food supply disruptions.

The structural constraints on private investment, as reflected in ease-of-doing business indicators, have to be addressed further to stimulate private job creation and eventually raise incomes, he added.

“It is equally important to address food supply disruptions and curtail hoarding in food markets to bring down prices,” said the governor.

Published in Dawn, December 4th, 2019

Opinion

The sixth wave

The sixth wave

PCR testing has drastically gone down in Pakistan and our disease surveillance system needs much more strengthening.

Editorial

Udaipur killing
Updated 01 Jul, 2022

Udaipur killing

The crime committed in Udaipur did not happen in a vacuum.
Unacceptable demand
Updated 01 Jul, 2022

Unacceptable demand

Negotiating with extremists is tricky; no peace treaty with them has lasted beyond a few months.
Tough times ahead
01 Jul, 2022

Tough times ahead

THE finance ministry’s projection of 15pc inflation, much higher than the targeted rate of 11.5pc, during the new...
More ‘prior actions’
Updated 30 Jun, 2022

More ‘prior actions’

It is crucial that the IMF reconsiders its stance and releases the funds at the earliest to calm uneasy markets.
Growing power crisis
30 Jun, 2022

Growing power crisis

THE country’s escalating power crisis risks exacerbating the law-and-order situation as people take to the streets...
Attack on polio team
30 Jun, 2022

Attack on polio team

THE threat of deadly violence never seems to diminish for health workers and police officials involved in...