ISLAMABAD – Financial Rating Agency Moody’s latest report on Pakistaneconomy may not be a welcoming news for country as it has warned againstsignificant risks to the country economy from external pressures.
Financial Rating agency Moody’s latest report states that In terms of debtaffordability, Pakistan, Sri Lanka, Egypt, Angola, and Ghana would see themost significant deterioration in their interest payments-to-revenue ratioscompared to Moody’s baseline 2019-20 forecasts.
According to the report, this worsening situation is driven by large grossborrowing requirements of between 15%-30% of GDP annually, as a result ofrelatively short average maturities of around five years and short termTreasury bills, on average, comprising over 30% of outstanding domesticdebt.
Moody’s also highlights the effects of Pakistan’s IMF programme on theeconomy. “Pakistan’s external financing gap has been alleviated by a $6billion, 39-month IMF agreement, along with other bilateral andmultilateral borrowings providing an external buffer; however, externalvulnerability remains high following years of wide current account deficitsand a lack of substantial non-debt-creating FX inflows,” states the report.
Read Top Stories
“We expect that a more market-determined exchange rate and importcompression will bolster foreign-exchange reserve adequacy against externaldebt repayments, still low levels threaten the ability of the government torefinance foreign-currency debt at affordable costs.”
The report also states that Pakistan’s fiscal profile has been furtherweakened by the higher interest rates following the central bank’scumulative 750 basis point hike over the last two years in response toexternal imbalances. “With the frequent rollover of short-term Treasurybills, these higher domestic interest rates have rapidly increased thegovernment’s borrowing costs.”
