Moody’s Raises Pakistan Outlook as Economy Improves Under Sharif

[Saifullah Sani]

Pakistan’s credit rating outlook was raised to positive from stable by Moody’s Investors Service, signaling an upgrade is possible for the first time since 2006 as the economy steadily improves. The new outlook “is based on a strengthening external liquidity position, continued efforts toward fiscal consolidation, and the government’s steady progress in achieving structural reforms under the IMF program,” Moody’s analyst Anushka Shah said in a statement on Thursday.

The company maintained its non-investment-grade Caa1 foreign currency rating and said implementation of more reforms, successful completion of the International Monetary Fund program or better finances could trigger an upgrade. Prime Minister Nawaz Sharif is using lower oil prices, higher remittances and more consumer spending to push growth toward a seven-year high. Even so, a large budget deficit, high debt costs and dependence on external funding leaves Pakistan vulnerable to political and economic risks, Moody’s said.


When Sharif took power in May 2013, he won a $6.6 billion loan from the IMF to avert a balance-of-payments crisis. Since then, the country has cleared six program reviews and has also regained eligibility to borrow from the International Bank for Reconstruction and Development. “Fundamentals of the country are improving,” Hedi Ben Mlouka, chief executive officer at hedge fund Duet Mena Ltd., said in a March 18 phone interview from Dubai. Even a “marginal improvement will make a very big difference and make it an attractive investor destination.”

The benchmark KSE100 stock index has rallied 56 percent since Sharif took office, and the rupee has outperformed every major global currency over the past six months. Foreign exchange reserves have doubled in the past year to $16 billion and the IMF forecasts Pakistan’s economy to expand 4.3 percent this year, compared with the five-year average of 3.6 percent.

The nation’s central bank last week cut its benchmark interest rate to the lowest in almost 13 years as lower oil prices slowed inflation. For Related News and Information: Bombs, Protests, Blackouts Fail to Cripple Pakistan Economy Hedge-Fund Manager Duet Mena to Increase Pakistan Stock Holdings Pakistan Cuts Key Rate to Lowest in 13 Years as Inflation Slows

Moody’s Raises Pakistan Outlook as Economy Improves Under Sharif - Bloomberg Business

 

[Kabira]

First time since 2006 and some people still doubt Muhammad Nawaz Sharif.

 

[farhan_9909]

Good news.

expecting more FDI

 

[Tameem]

@ziaulislam
What our resident economist think about this move from Moody's?

 

[waleed3601]

First time since 2006 and some people still doubt Muhammad Nawaz Sharif.

if he actually gets the 7% growth and zero loadshedding he promised, i wont doubt him ever again. but until he fulfills his election campaign promises, gonna keep doubting :p

 

[Muhammad Omar]

if he actually gets the 7% growth and zero loadshedding he promised, i wont doubt him ever again. but until he fulfills his election campaign promises, gonna keep doubting :p

For that we all have to wait till Dec 2017 i guess... 4000 MW from China and the projects under construction would less the current load shedding ...

 

[ziaulislam]

if he actually gets the 7% growth and zero loadshedding he promised, i wont doubt him ever again. but until he fulfills his election campaign promises, gonna keep doubting :p

achieving those figures is easy but destroying the fundamentals could lead to another fiscal disaster..we have seen that before..
importing power while your exports are stagnant and especially when u have ample indigenous resources is worse than having no power for few more years

 

[Kabira]

achieving those figures is easy but destroying the fundamentals could lead to another fiscal disaster..we have seen that before..
importing power while your exports are stagnant and especially when u have ample indigenous resources is worse than having no power for few more years

If importing power is cheap enough then why not. I bet it will be way cheaper then currently rs 10 of unit from oil, which it also not that bad right now.

 

[Mutakalim]

achieving those figures is easy but destroying the fundamentals could lead to another fiscal disaster..we have seen that before..
importing power while your exports are stagnant and especially when u have ample indigenous resources is worse than having no power for few more years

Kindly explain further

 

[Kompromat]

Please note it has a lot to do with the improved security as a result of OpZarbeAzb

 

[SecularNationalist]

Please note it has a lot to do with the improved security as a result of OpZarbeAzb

Off course a few days ago people died in a suicide attack.Since this zarb e azb suicide attacks and terrorism haven,t changed.

 

[Kompromat]

Off course a few days ago people died in a suicide attack.Since this zarb e azb suicide attacks and terrorism haven,t changed.

The violence has decreased very much, for instance compared to 2009-10. The sporadic attacks will continue, however it will be silly to think that we haven't dismantled their capability. These screwheads were thinking about taking over our state!

 

[ziaulislam]

If importing power is cheap enough then why not. I bet it will be way cheaper then currently rs 10 of unit from oil, which it also not that bad right now.

cheapest energy we are importing from tehran which will cost us 6+1 rs=7rs
from iran we are playing 12 rs. from india proposed price is 20, and from china it should be higher than 16

producing power via hydro,local coal or even imported is better than any of the above. even though imported coal will be somehwat expenive but it will give local jobs and local push

producing power via even furnace oil is better and cheaper than importing from china or india
producing via imported coal or imported LNG is way cheaper or better than importing from iran
govt is just looking for a shortcut

remember importing power means your GDP decreases the amount of import but producing it yourself increase your GDP. e.g if we import 10 billion units it will decrease our gdp by 1-2%!

@ziaulislam
What our resident economist think about this move from Moody's?

haha, i am resident physician actually ! the reason for sporadic and full of mistakes posts

 

[OrionHunter]

@ziaulislam
What our resident economist think about this move from Moody's?

They are in no mood for Moodys!!

 

[ziaulislam]

Kindly explain further

increasing continuously imports that are unnecessary will ultimately cause a balance of payment crisis that happened in 2009 due to oil price crisis

increasing direct taxation will kill growth in middle class

neglecting sector of education and health sector we are letting another generation go uneducated

most importantly importing power will mean the debt will just keep on collecting as external debt probably encouraging even more power losses

all they have to is to insert smart meters into the system .

summary of moody article is self explanatory i dont know whats so encouraging in it?

1.it says rating went up to due to foreign liquidity increase(courtesy to IMF and very expensive baseline 6 foreign bonds), (rating in simple words means the chances of being defaulted which have gone down due to increase foreign reserves
2. more fiscal restrain(limiting growth) one of the reason why growth is limited even though oil prices are rushing down, but the positive thing it increases your rating
3. growth increased because of low oil prices and higher remittances(wow what an achievement) even so it just went from 3.6 (the average includes -tive flood year growth!) to 4.3 (claps!!!)

4. i bet under current favorable conditions even PPPP might have improved this much too

5. having said that i believe PML N accepting IMF decision and building it reserves deserves a applause but that doesnt means its performance is good, its just not disastrous!

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Pakistan’s credit rating outlook was raised to positive from stable by Moody’s Investors Service, signaling an upgrade is possible for the first time since 2006 as the economy steadily improves. The new outlook “is based on a strengthening external liquidity position, continued efforts toward fiscal consolidation, and the government’s steady progress in achieving structural reforms under the IMF program,”

Prime Minister Nawaz Sharif is using lower oil prices, higher remittances and more consumer spending to push growth toward a seven-year high. Even so, a large budget deficit, high debt costs and dependence on external funding leaves Pakistan vulnerable to political and economic risks, Moody’s said.


When Sharif took power in May 2013, he won a $6.6 billion loan from the IMF to avert a balance-of-payments crisis.

Foreign exchange reserves have doubled in the past year to $16 billion and the IMF forecasts Pakistan’s economy to expand 4.3 percent this year, compared with the five-year average of 3.6 percent."
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