Credit rating agency, The Standard and Poor’s Global Rating, gave Pakistan a “B” in the economic rating, a grade that reflects stability in the macroeconomics of the country. The credit rating agency maintained that the economic resilience of the country’s economy in the face of political instability and pressures affirms a favorable outlook.
The rating given by Standard and Poor’s was a sigh of relief for the Ministry of Finance that said that the economic outlook for the future looks promising and things are not going to get worse from the current conditions. Pakistan is all set to issue $2 billion international bonds next month and the rating issued will attract the investors into buying these bonds.
The long-term and short-term rating of B given by the agency is highly speculative that can yield significant returns for the investors. Thus it is now expected that Pakistan will now be able to issue the $2 billion bonds at a good rate owing to the rating given by the credit rating agency. While this had been some sort of a positive news for the country, S&P revised its external and fiscal performance for the coming time due to the upcoming general elections.
Standard and Poor’s in its report said that the performance was revised due to the increase in imports, specifically under the China-Pakistan Economic Corridor (CPEC) project. Upcoming general elections followed by a poor performance from the provincial government was the main reason for the revision in the fiscal and external account performance.
The credit-rating agency, however, said that the increase in imports due to CPEC was a temporary thing as the capital imports are bound to happen in the first three years only. It is expected that the imports from CPEC will subside from 2019 onwards which will also cut down the widening current account deficit of the country.
The only problem for Pakistan that exists is that the credit rating agency will either increase the rating of Pakistan, if economic growth continues and security conditions improve in the country. However, if the current infrastructure investments do not lead to any macroeconomic stability, the credit rating will go down, rendering the next 2 years in a make or break situation for Pakistan.
CPEC investments in the energy and infrastructure have also raised GDP growth rate expectations to 5.7% from 2017-2020. Standard and Poor’s expects that the Pakistani government will continue to work towards macroeconomic stability in the coming years as well, despite facing challenges from India and Afghanistan.