*ISLAMABAD – Moody’s Investors Service has revealed the adverse impact forPakistan over the appreciation of US dollar against Pakistani Rupee.*
*Moody’s said on Friday that Pakistan is among the top countries mostvulnerable to dollar appreciation. This means that it would be harder forPakistan to repay its foreign loans.*
Assessing frontier and emerging markets based on their balance of paymentsituation and foreign exchange reserves, the New York-based investors’service said Pakistan is facing even higher external pressures. This isbecause of a high domestic demand and heavy investment in theChina-Pakistan Economic Corridor that resulted in higher imports andwidened the trade gap to $18 billion as imports exceed exports.
This trade deficit is likely to touch 4.8% of the GDP this year, Moody’swarned.
Pakistan’s gross borrowing requirements are among the highest on Moody’slist, around 27 to 30% of its GDP, because of the government’s heavyreliance on short-term borrowing. Around one-third of the government debt,which stands at around Rs27 trillion, has to be paid in dollars.
Any sharp and sustained increase in the dollar would significantly weakenPakistan’s debt affordability, meaning its ability to pay back its debts.
Foreign reserve coverage of external debt repayments is $10.23 billion,barely enough to pay for a month-and-a-half worth of imports. Improvingdollar reserves is essential, which could be achieved through and incombination with an IMF programme, it said.