WASHINGTON: The United States has credited Pakistan’s reform efforts and the programme it has signed with the International Monetary Fund (IMF) for Moody’s recognition of the country’s economic stability.

Earlier this week the New York-based international credit rating agency raised Pakistan’s economic outlook from negative to stable on the back of the country’s reforms supported by the IMF programme.

“Pleased to see that Moody’s Inv Svc has revised Pakistan’s credit outlook to stable, thanks to Finance Ministry Pakistan’s reform efforts and IMF programme,” said head of the US State Department’s South and Central Asia Bureau, Alice Wells.

“With bold economic reforms, Pakistan can boost growth, attract private capital, and expand exports,” she wrote in a tweet posted on Wednesday afternoon.

Ms Wells also said the United States would be bringing 15 trade delegations from Pakistan next year to enhance commercial ties between the two countries. The US Commerce Department said these will be buyer delegations and will attend US and regional trade shows over the next year.

Wells says 15 trade delegations from Pakistan will visit US next year

She also commended Pakistan for surging 28 slots on the World Bank’s 2020 Ease of Doing Business ranking and for “being highlighted as one of the top ten reformers globally”.

Moody’s said improvements in the balance of payments was a primary driver of the rating action but added that foreign exchange buffers would still take time to rebuild.

The upgrade was welcomed by Pakistan’s Ministry of Finance, which attributed the development to an “improvement in the balance of payments position, supported by policy adjustments and currency flexibility”.

Adviser to the Prime Minister on Finance Dr Abdul Hafeez Sheikh said at a news briefing in Islamabad on Tuesday that Moody’s report was not the only agency to appreciate Pakistan’s reforms, other leading financial institutions were also doing the same.

Moody’s had in June last year lowered Pakistan’s outlook to negative from stable owing to erosion in foreign exchange buffers due to heightened external pressures.

The agency’s representatives visited Islamabad on Nov 27 and noted that Pakistan’s economic fundamentals were still susceptibile to risks but the country’s institutional strength had increased.

In October, the World Bank listed Pakistan among ‘top 10 improvers’ on its Ease of Doing Business Index, placing it among the most notable improvers, alongside Saudi Arabia, Jordan, Togo, Bahrain, Tajikistan, Kuwait, China, India, and Nigeria.

“This rise is significant and made possible by collective and coordinated actions of the federal government and provincial governments of Sindh and Punjab over the past year,” said Illango Patchamuthu, World Bank Country Director for Pakistan.

In another recent statement, Ms Wells urged Pakistan to continue the reforms that had helped stabilise its economy.

“True sustainable development is really a marathon and not a sprint. It requires the development of effective regulatory framework, strong rule of law, fiscal health, and an enabling business climate,” she said.

The US official said that Washington was expanding its Development Finance Corporation (DFC) and once it’s up and running, “Pakistan is going to be a country of great interest”.

DFC will have more than double the investment cap than the Overseas Private Investment Corporation (OPIC), increasing from $29 billion to $60bn. OPIC is a US government agency which mobilises private capital for overseas investments.

Ms Wells said that doubling the cap would enable investment in projects that have high standards and are financially sustainable over the long haul.

On July 3, the IMF approved a $6bn bailout package to help “return sustainable growth” to Pakistan’s economy. This is the 13th IMF bailout for Pakistan, which seeks to correct “structural imbalances” in the country’s economy. The programme requires Pakistan to increase taxation in order to repay external debt and increase foreign exchange reserves.

The programme hopes that Pakistan will increase its foreign exchange reserves from $6.824bn to $11.187bn next year. This will increase the country’s net reserves from negative $17.7bn to negative $10.8bn over the same period.

Under the programme, Pakistan needs to enhance its tax collection target from Rs3.94 trillion ($25bn) to Rs5.5tr.

The programme also calls for additional Rs1.5tr and Rs1.31tr hikes in revenue collection over the next two years.

Published in Dawn, December 5th, 2019