Dr Qaisar Rashid<\/p>\n
Impediments refuse to leave Paki\u00adstan unattended. On February 27, Moody\u2019s Investors Service, a glob\u00adal integrated risk assessment firm that empowers organizations to take better decisions, issued a report on Pakistan\u2019s long-term credit rating. Moody\u2019s not only kept the rating unchanged at Caa3, but it also identified hurdles (political and economic) in the way of improving Pakistan\u2019s credit status.
\nIn the Moody\u2019s lexicon, the Caa3 rank\u00ading is a jinx, for its being considered poor standings of a country subject to very high credit risk. Pakistan has been at this footings since February 2023, when Moody\u2019s downgraded Pakistan\u2019s rating from Caa1 to Caa3, thereby declaring \u201cvery high liquidity and external vulner\u00adability risks\u201d attached to dealing eco\u00adnomically with the country.
\nFor Pakistan, the immediate concern is to negotiate the availability of the remaining third tranche amounting to $1.1 billion in this month from the on\u00adgoing Standby Agreement with the In\u00adternational Monetary Fund (IMF). In this month, Pakistan would be facing the challenge of securing the tranche in the face of allegedly rigged elec\u00adtions \u2013 the exercise which divided the country. Form 45 representing the will of voters has lost their battle to Form 47 representing the dictate of the state machinery.
\nNevertheless, the main implication of the Moody\u2019s report is to assess invest\u00adment risks for any international loan donating organizations such as the IMF and others, before they enter into any agreement with Pakistan, especially in the long term. This is where the rub lies. From April to June, rounds of nego\u00adtiations are expected between Pakistan and the IMF. Parleys would be done by the newly formed coalition government, while fighting for its own legitimacy. The government\u2019s preference would be to demand a loan amounting to at least $6 billion for four or five financial years, starting from July 1, 2024.
\nTo elaborate, Pakistan may be ask\u00ading for an Extended Fund Facility (EFF) to overcome medium-term crisis of the balance of payments owing to structur\u00adal weaknesses which require time to ad\u00address. In 2021, Pakistan deviated from its commitments made to the IMF, there\u00adby losing the IMF\u2019s trust. Pakistan was penalized for the misadventure. This time, however, Pakistan may be show\u00ading its willingness to identify new ar\u00adeas (such as real estate and retailers) to collect revenue, and implement medi\u00adum-term structural reforms which could permit a longer repayment period.
\nOstensibly, Pakistan is eager to enter\u00ading into a long term engagement with the IMF, considering it an organization of the last resort. Along with the EFF, Pakistan may be asking for the Extended Credit Facility (ECF), which is medium-term fi\u00adnancial assistance, to deal with the bal\u00adance of payments problems. The ECF is available to poor countries which are struggling to reduce poverty. For the past some years, environmental catastrophes such as rains and floods have been over\u00adrunning Pakistan\u2019s south, plunging the country into the poverty trap.
\nThe availability of both the EFF and ECF depends upon the way Pakistan shows willingness to do its part of the job: introducing structural reforms through taxation and privatization, be\u00adsides reducing expenditures. A ma\u00adjor challenge would be that a weak co\u00adalition government would be formed to negotiate with the IMF \u2013 to secure a huge loan from the IMF, which would impose tough conditions.
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\nThrough its rating mechanism, Moody\u2019s avowal to alarm the world of Pakistan\u2019s higher probability of default and a greater degree of investment risks is a caveat that Pakistan has to conquer. Pakistan has to show that its potential to afford debt is higher than what is ad\u00adumbrated by the Moody\u2019s. Nonetheless, a picture is clear to everyone. With high debt-servicing liabilities, Pakistan\u2019s hav\u00ading room for fiscal flexibility has been shrunk, thereby making the country in\u00adcapable of undertaking key expendi\u00adtures on infrastructure and social ini\u00adtiative. It simply means that the loan sought would not be spent on the de\u00advelopmental projects once again. This is the point at which Pakistan and the IMF would wrestle with each other.
\nPakistan\u2019s laggard social sector (health and education) is bound to hurt Pakistan in the long run. The same is the situa\u00adtion with the infrastructure (road, sew\u00aderage, water channels) area. Pakistan\u2019s misplaced spending priorities have dis\u00adaffected its population, which uses all means available at its disposal to evade taxation. The recent attempt to maneu\u00adver the general elections has added fuel to the proverbial fire by disenfranchising the voters, who thought that they could chart their future through the ballot box.
\nSince the time Pakistan has taken its eyes off the population sector, the crisis of overpopulation has gone grim. Paki\u00adstan\u2019s failure to do population planning comes back to haunt the country.
\nNevertheless, privatization would mean reduction in the size of sovereign\u00adty. Selling assets to run the country may be feasible in a country which reduces its expenditures especially non-devel\u00adopment one. However, Pakistan is in no mood to do so. Money got through priva\u00adtization is spent quickly. Interesting\u00adly, Pakistan is hoping against hope from prospects of foreign investment in the agriculture sector.
\nThe major challenge for Pakistan is how to make itself investor friendly. The facility of the ease of doing business is applicable to both local and foreign in\u00advestors. If local investors are disinclined to invest, foreign investors would never prefer Pakistan. The fear of political in\u00adstability is still running high, making the country unsuitable for foreign invest\u00adment. Before achieving economic stabil\u00adity, achieving political stability would be a huge challenge. Instead of resolving the issue, Pakistan has enhanced the chal\u00adlenge and has fallen a pray to.
\nTo offer space for the ease of doing business, Pakistan has to improve the performance of its judiciary, which is mostly entangled in wasting its time and worsening it repute by deciding on fake, fabricated and politically mo\u00adtivated cases.<\/p>\n
The writer is a freelance columnist. He can be reached at qaisarrashid@yahoo.com<\/p>\n","protected":false},"excerpt":{"rendered":"
Dr Qaisar Rashid Impediments refuse to leave Paki\u00adstan unattended. On February 27, Moody\u2019s Investors Service, a glob\u00adal integrated risk assessment firm that empowers organizations to take better decisions, issued a report on Pakistan\u2019s long-term credit rating. Moody\u2019s not only kept the rating unchanged at Caa3, but it also identified hurdles (political and economic) in the […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10],"tags":[1683],"class_list":{"0":"post-391110","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-article","7":"tag-dr-qaisar-rashid"},"yoast_head":"\n