ISLAMABAD – Moody’s, the sovereign credit rating agency has portrayednegative image of the Pakistan economy in the coming months.
Moody’s has said that Pakistan’s foreign exchange reserves are low, andgross borrowing requirements are large, threatening the ability of thegovernment to refinance debt and fund deficits affordably.
The report further said that Pakistan does not have enough foreign exchangereserves to pay its public and private external debt due over this year.Foreign exchange reserves are on the lower side in Pakistan and theythreaten the government to refinance debt.
Moody’s external vulnerability indicator (EVI) reading for Pakistan hasexceeded 160% for 2019, indicating that total public and private externaldebt due over the next year will be larger than foreign exchange reserves.
Pakistan’s foreign reserves declined owing to persistent current accountdeficit. The reserves coverage of imports has also fallen, Moody’s furthersaid.
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“Reserves coverage of imports has also fallen and the total reserves arenow worth less than two months of goods and services imports’’ the creditagency noted.
According to Moody’s, tighter global funding conditions resulting in highercredit risk premia and/or domestic interest rates would quickly transmit togovernment finances in Pakistan – where debt affordability is already weak–owing to large gross borrowing requirements.
