The Moody’s Investor Service, a well-known international credit rating company, on Thursday, warned the country calling the no-confidence motion against PM Imran “credit negative” for Pakistan, saying it could act as a hurdle in the way of a smooth reform process in the country.
“We view the no-confidence motion as credit negative because it raises significant uncertainty over policy continuity, as well as the government’s ability to continue to implement reforms to increase productivity growth and secure external financing, including from the International Monetary Fund (IMF),” the ratings agency stated in the issued report.
It added that the motion has come at a time when the country is burdened with rising inflation and increasing current account deficits amid rising global commodity prices.
“A further deterioration in its external position, including a significant widening of the current account deficit and an erosion of foreign-exchange reserves, would threaten the government’s external repayment capacity and heighten liquidity risks,” it observed.
According to the agency, Pakistan 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 military conflict, which has driven up global commodity prices, has also amplified pressure on the country’s external position.
Its current account deficit 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 before.
“We now expect the deficit to widen to 5-6 percent of GDP in fiscal 2022 compared with our previous forecast of 4 percent,” Moody’s statement said.
“This further widening will place immense pressure on Pakistan’s foreign reserves, which declined to $14.9 billion as of February 2022 from $18.9 billion in July 2021 which are sufficient to cover only around two months of imports.”
Finance Ministry officials of the country also noted the economic situation was moving in the right direction prior to the no-confidence motion, however, the alarm bells of uncertainty were now beginning to ring.