In a big relief to Imran Khan's government, investors may take a positive view towards the ailing Pakistani economy, as Moody’s Investors Service has changed country’s credit rating outlook from negative to stable.
“The change in outlook to stable is driven by Moody’s expectations that the balance of payments dynamics will continue to improve, supported by policy adjustments and currency flexibility”. said the agency.
“Such developments reduce external vulnerability risks, although foreign exchange reserve buffers remain low and will take time to rebuild”, it added
This is a big positive for Pakistan, as the decision may improve the foreign currency inflows into the country.
“Moody’s upgrades Pakistan’s outlook to B3 ‘Stable’ from ‘Negative’. The upgradation of outlook to ‘Stable’ is affirmation of Government's success in stabilising the country’s economy and laying a firm foundation for robust long term growth”, Abdul Hafeez Shaikh, adviser to the prime minister of Pakistan on finance and revenue, exulted after the rating upgrade.
The announcement pushed Pakistan’s stock market above 40,000 points, which is highest after a gap of 10 months.
Earlier, on 7 November, Moody’s made a surprise announcement by trimming its rating outlook for India to “negative” from “stable”, citing increasing concerns that Asia’s third largest economy will grow at a slower pace than in the past.
Justifying the rating, Moody’s said the cut in the outlook “reflected government and policy ineffectiveness in addressing economic weakness, which has led to an increase in debt burden”.
India’s economic growth plummeted to 4.5% in the second quarter (July-September 2019), which is lowest in 26 months.
Meanwhile, Prime Minister Khan claimed that over the first four months of the current fiscal year beginning April 2019, Pakistan’s current account deficit fell by 73.5 percent compared to the same period last fiscal year.
Pakistan’s exports of goods and services in October 2019 rose 20 percent over the previous month and 9.6 percent over October 2018.
“The Pakistani economy is finally heading in the right direction as more of our economic reforms bear fruit: Pakistan's current account turned into surplus in Oct 2019, for the first time in 4 yrs. Current account balance was +$99 mn in Oct 2019 compared to -$284 mn in Sept 2019 & -$1,280 mn in Oct 2018", Imran Khan tweeted on 19 November.