ISLAMABAD: Pakistan will turn to the International Monetary Fund (IMF) to meet its external financing needs, Moody’s Investors Service said in a note on Friday.
“Pakistan’s heightened external vulnerability is the chief credit challenge,” said Moody’s, an independent ratings agency that assesses credit risk of countries. Pakistan’s present dollar reserves provide only two months’ cover to pay for imports, which need to improve to avoid a crisis.
The possible policy options for the incoming Pakistan Tehreek-e-Insaf (PTI) government would be monetary and fiscal tightening, Moody’s said. It expects the exchange rate to depreciate and adds that Pakistan will turn to the Washington-based lender for another bailout package.
In the longer term, Pakistan’s credit challenges include the country’s very low global competitiveness, institutional weaknesses relating to governance, rule of law and control of corruption, and a narrow tax base.
The New York-based investors’ service said the ongoing implementation of the China-Pakistan Economic Corridor (CPEC) will drive improvements in power supply and infrastructure and help raise economic competitiveness and boost industrial activity over time. Improving governance, reducing corruption and widening its narrow tax base will be challenging for the new government, it cautioned.
Published in Daily Times, July 28th 2018.