Moody’s Investors Service has said that possible policy options for the new Pakistan Tehreek-e-Insaf (PTI) government would include monetary and fiscal policy tightening, additional exchange rate depreciation, and turning to the International Monetary Fund (IMF) for external financing.
“Pakistan’s heightened external vulnerability is the chief credit challenge in the near term for a new PTI-led coalition government”, said Moody’s in a statement issued in light of the recent general elections in Pakistan.
PTI appears to be on track to win the largest number of parliamentary seats in Pakistan’s general election and has already declared victory, even though the results remain contested. It is expected that PTI will form a majority government with the help of smaller parties and independents.
Moody’s full statement reads:
Pakistan’s heightened external vulnerability is the chief credit challenge in the near term for a new PTI-led coalition government. Possible policy options would include monetary and fiscal policy tightening, further exchange rate depreciation, and turning to the IMF for external financing. However, the implementation of such measures may face delays as PTI’s election pledge also includes increasing social spending, reducing taxes – as part of tax reform plans – and lowering energy costs.
In the long term, Pakistan’s credit challenges include the country’s very low global competitiveness; institutional weaknesses relating to governance, rule of law and control of corruption; and a narrow tax base. Moody’s expects the ongoing implementation of the China Pakistan Economic Corridor (CPEC) to drive improvements in power supply and infrastructure, which should raise economic competitiveness and boost industrial activity over time.
The anti-corruption platform that PTI contested elections on has the potential to address some long-standing institutional weaknesses, although measures to improve governance and reduce corruption will be challenging for any new government to implement.
Given limited success on tax reforms by previous governments, Moody’s considers the narrowness of the country’s tax base will remain a key challenge for the new government.
And they said they would appreciate the Rupee. So much for being a blabber mouth
PTI has said nothing about Moody’s suggestions. Read the whole article before commenting