New Delhi: A continuous increase in tension with India can damage Pakistan’s development, affect its fiscal consolidation and macroeconomic stability, warning Moody’s rating on Monday.Conversely, it does not expect a significant impact on India, besides the government weighs high defense spending on the fiscal consolidation scheme.
Pakistan was on the verge of bankruptcy until the International Monetary Fund once again excluded it, provided it would fulfill several conditions. Its credit rating, according to CAA2+ Moody’s, has a speculative grade, indicating its weak basic things.
“Pakistan’s macroeconomic conditions are improving, growth with development is gradually increased, inflation declines and foreign-intensive reserves are increasing, amidst continuous progress in the IMF program. Frequent increase in stress can reduce Pakistan’s access to external funding and put pressure on its foreign-universe, which is necessary to meet its external loan payment needs for the next few years, “Moody’s said.
Apart from the assistance of multilateral agencies including the IMF and World Bank, Pakistan also managed to roll loans from Saudi Arabia, China and UAE to tide on foreign exchange and debt crisis.
Weak emotions are also reflected in the stock market indices. Pakistan’s benchmark KSE -100 index fell another 635 points on May 5. Since 23 April, the index has lost more than 7,500 points, or more than 6% due to the possibility of conflict.
However, Indian markets have organized. “Comparatively, macroeconomic conditions in India will be stable, which will be stable with high levels of development, between strong public investment and healthy personal consumption. In a scenario of continuous increase in localized stresses, we do not expect major disruption in India’s economic activities because it has minimal economic relations with Pakistan (less than 0.5% of India’s total exports in 2024), “Moody said.
Moody’s is not a budget for a broad-based military conflict. “Our Bhurajnical Risk for Pakistan and India is assessed for constant stresses, which is sometimes caused by limited military reactions. We believe that the flare-up will be from time to time … but they will not lead the lump sum military conflict.”
