IN a positive development, following Fitch’s upgrade last month, Moody’s has also elevated Pakistan’s credit rating from Caa3 to Caa2, notably upgrading the outlook from stable to positive. Analysts believe this development signals growing global confidence in Pakistan’s ability to manage its financial challenges and establish a foundation for sustainable economic growth. Expressing his satisfaction with the achievement, Prime Minister Shehbaz Sharif noted that Moody’s Caa2 rating for Pakistan is an international endorsement of the government’s economic strategies and expressed optimism that the economy will maintain its positive trajectory and continue to improve.
The Prime Minister has a point in claiming credit for the satisfying development as his Government rescued the economy from the brink of default by prioritizing the country’s needs over political considerations during his previous term. The decisions that his coalition government took for the sake of a better future for the country caused significant political damage to his party, which could not achieve comfortable majority in the general election but the leadership of the PML(N) preferred continuity of policies and programmes even after formation of the incumbent government and as a result there are now encouraging signs on the economic horizon. Some analysts point out that after the upgrade Pakistan is now better positioned to access international capital markets on more favourable terms, adding that this paves the way for the potential issuance of Eurobonds and Panda bonds at more competitive rates, a move that could significantly lower borrowing costs, alleviate debt servicing pressure and create essential fiscal space. The credit for all this surely goes to the clear-headed policies of the Prime Minister and hard work of his economic team, led by dynamic Finance Minister Muhammad Aurangzeb, who not only concluded a fast-paced agreement with the International Monetary Fund (IMF) to end uncertainty and confusion about the future course of the economy but is also instrumental in taking the much-talked-about process of structural reforms to the logical conclusion. However, there are still daunting challenges ahead and the decision-makers will have to adopt a prudent strategy to address them squarely. The government is facing some difficulty in lining up necessary external resources which is a pre-requisite for further progress on the IMF package.
Taking more loans either from the IMF or from commercial banks in the Gulf/bilateral donors is not a wiser approach as the country is already facing enormous difficulties in repaying its old loans and mark up on them and, therefore, the government needs to re-prioritize expenditure, inculcating the habit of living within our (limited) means. The challenges to the economy were also highlighted by the shutter down strike of the business community on Wednesday on an issue that should, otherwise, be a cause for shame for them – resistance to pay even a symbolic tax. It is an open secret that this segment of the society has been earning billions but paying almost nothing to the national kitty in terms of taxes on their enviable income. The government is resisting pressure from this powerful pressure group but there is a clear sign of compromise on principles as the ‘Tajir Dost’ scheme has been amended time and again to placate traders. The quantum of tax under the scheme has been lowered to the minimum (for the last category) – just Rs. 100 a month which means about Rs.3 per day – less than a shopkeeper earns profit on a pack of biscuits but they are not ready to pay even that much to the national exchequer. Strangely enough, the Government has dropped the requirement for them to disclose their assets and accounts, which other filers are needed to do in their annual income tax returns. And despite all these concessions they are now threatened to continue their shutter down till abolition of the scheme altogether. It is also shocking that some political parties are extending a helping hand to tax evaders. There are also challenges of rationalizing the electricity tariff; stemming gas prices; resisting temptation to increase prices of POL products further on different excuses like PDL and refinery upgrade; and reversing plans that are choking the growth of the otherwise vibrant IT and telecom sector.
