By: Manoj Gupta Edited By: Apoorva Misra CNN-News18 Last Updated: October 22, 2022, 13:43 IST Islamabad, Pakistan According to an estimate of the World Bank, Pakistan’s economy is expected to grow by only 2.2 per cent, whereas earlier it grew by 6 per cent, signalling a huge gap. (Reuters File) Beleaguered by a political crisis post a regime change and a sinking economy, Pakistan found reason to celebrate on Wednesday as the country was finally taken off the Financial Action Task Force’s (FATF) Grey List , an ignominy the country was carrying since June 2018 as it went slow on preventing money laundering and terrorism financing.
However, for India’s troubled neighbour, the FATF news is just a drop in the ocean as it struggles with a sinking economy exacerbated by downgraded ratings, devalued bonds, low reserves and burden of repayments.
Clubbed with the political chaos, the economic mess threatens to destabilise Pakistan even further.
The latest warning for Pakistan came from global rating agencies that have asked the country to take strict measures to avoid economic default.
Global ratings agency Fitch cut Pakistan’s sovereign credit rating on Friday by a notch to ‘CCC+’ from ‘B-’, citing a further deterioration in the country’s external liquidity and funding conditions and a drop in foreign exchange reserves.
A few days ago, renowned global economist Steve Hanke said Pakistan Prime Minister Shehbaz Sharif’s government was failing to save the ‘sinking ship’. “Its [Pakistan’s] sovereign bonds have lost more than 60% of their value this year.
I’m not surprised,” Hanke wrote on his official Twitter handle.
Not only Fitch, but Moody’s has also downgraded Pakistan.
On October 6, for the first time in seven years, Moody’s Investor Service cut Pakistan’s sovereign credit rating by one notch to Caa1 from B3, which is perilously close to a default.
Even as the country was licking its economic wounds, it is expected to receive another blow as its next big payment , billion in international bonds , is due in December 2022.
According to an estimate of the World Bank, the economy is expected to grow by only 2.2 per cent, whereas earlier it grew by 6 per cent, signalling a huge gap.
The country’s weekly inflation/CPI has reached 27.13 per cent.
Pakistan’s total foreign reserves are .25 billion, while the State Bank of Pakistan has only .59 billion.
Pakistan’s total external debt and liabilities stand at around 0.2 billion, which includes a billion debt from China.
PM Sharif is likely to embark on a crucial trip to China next month amidst efforts by the cash-strapped nation to arrange billions of dollars for payment of debts and bridge trade deficit.
A huge source of government income is remittances, which continued to fall during July-September 2022, totalling around .685 billion, down more than 6 per cent from .199 billion in July-September 2021.
According to experts, Pakistan should not expect more than billion in remittances in the current fiscal year ending June against the target of .2 billion.
What made matters worse was that the global markets were “jittery” about Pakistan, given the economy had suffered at least -25 billion in losses after the floods, which could go as high as -35 billion.
Despite the IMF programme revival and friendly countries’ help, Pakistan is on the brink of a debt default once again.
For a country eager to rebuild its credibility, the signs don’t look very promising.
Read all the Latest News here About the Author Manoj Gupta is Group Editor, Security Affairs at CNN-News18 ...