ISLAMABAD
\nMoody\u2019s has raised concern over the political uncertainty in Pakistan, saying the no-confidence motion will affect the country\u2019s credit rating of \u2018B3 stable\u2019 negatively.
\nThe opposition parties in Pakistan tabled a no-confidence motion in the parliament, accusing Prime Minister Imran Khan of mismanaging the economy, and claimed that the ruling coalition no longer has a parliamentary majority, Moody\u2019s said on Thursday.
\n\u201cWe view the no-confidence motion as credit negative because it raises significant uncertainty over policy continuity, as well as the government\u2019s ability to continue to implement reforms to increase productivity growth and secure external financing, including from the International Monetary Fund (IMF),\u201d Moody\u2019s said.
\nPakistan Tehreek-e-Insaf party officially controls 155 seats out of 342 in the National Assembly, and has a majority of 179 once allied regional parties are included. However, reported defections have put that majority in doubt. The motion comes at a time when Pakistan is encumbered with surging inflation and widening current account deficit (CAD) amid rising global commodity prices.
\nA further deterioration in the country\u2019s external position, including a significant widening of the CAD and an erosion of foreign-exchange reserves, would threaten the government\u2019s external repayment capacity and heighten liquidity risks.
\nPakistan has faced significant pressure on its foreign-exchange reserves in recent months, amid elevated global commodity prices and a recovery in domestic demand. The Russia-Ukraine conflict, which has driven up global commodity prices, has amplified pressure on its external position. The country is a net oil importer, with petroleum and related products accounting for about 20 percent of total imports.
\nPakistan\u2019s CAD amounted to more than $12 billion between July 2021 and February 2022, a stark contrast to a $1 billion surplus in the same period a year earlier.
\n\u201cWe now expect the deficit to widen to 5 to 6 percent of GDP in the fiscal 2022, compared with our previous forecast of 4 percent. This further widening will put greater pressure on Pakistan\u2019s foreign reserves, which declined to $14.9 billion as of February 2022, from $18.9 billion in July 2021, according to IMF data, sufficient to cover only around two months of imports,\u201d said Moody\u2019s.
\nSecuring external financing, including from the IMF, will be key for Pakistan to continue to meet its external obligations given the pressures on its foreign-exchange reserves. However, the no-confidence motion raises significant uncertainty over the government\u2019s capacity to commit to implementing reforms, particularly those aimed at broadening the revenue base.
\nMoody\u2019s said that Pakistan\u2019s approach towards the IMF programme from this point is uncertain, and its participation could be in doubt. The country is undergoing its seventh review under the IMF\u2019s Extended Fund Facility programme, which has disbursed $3 billion out of the stipulated $6 billion to date.
\nHowever, discussions between Pakistan and the IMF appear to have stalled since early March, with the IMF expressing concerns over the government\u2019s recent relief package in response to rising inflation, including subsidies on fuel and electricity prices, as well as a tax amnesty for specified sectors.
\nRegardless of the outcome of the no-confidence vote, the ruling party will find it difficult to balance advancing revenue-raising reforms to secure external financing and political pressure from voters facing rising living costs.<\/p>\n","protected":false},"excerpt":{"rendered":"
ISLAMABAD Moody\u2019s has raised concern over the political uncertainty in Pakistan, saying the no-confidence motion will affect the country\u2019s credit rating of \u2018B3 stable\u2019 negatively. The opposition parties in Pakistan tabled a no-confidence motion in the parliament, accusing Prime Minister Imran Khan of mismanaging the economy, and claimed that the ruling coalition no longer has […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":{"0":"post-252396","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-business"},"yoast_head":"\n