KARACHI: Pakistan’s economy is facing significant stress due to the government’s inability to launch Euro and Panda bonds, which may hinder the country’s efforts to secure improved ratings from international rating agencies.
Despite attempts to convince top rating agencies in Washington of the economy’s improved macroeconomic numbers, a favorable outcome remains elusive.
However, there have been some positive developments. Two rating agencies, Fitch and Moody’s, have upgraded Pakistan’s rating by one notch, to CCC+ and Caa2, respectively.
Furthermore, the State Bank of Pakistan (SBP) has found an alternative source of dollars, purchasing $1.3 billion from the interbank market in June and July.
The government’s efforts to diversify its financing base by launching Panda bonds in the Chinese market have been unsuccessful, with Chinese companies showing limited interest despite potentially higher returns.
This lack of interest is also reflected in the failed sale of Pakistan International Airlines (PIA), with only one domestic real estate developer qualifying for bidding.
Prime Minister Shahbaz Sharif’s recent visits to Saudi Arabia and Qatar yielded announcements of billions of dollars in investments, but the financial market remains skeptical.
Experts suggest that the SBP can mitigate economic stress by purchasing maximum dollars from the local market, restricting imports, maintaining a stable exchange rate, curbing illegal foreign currency transactions, and incentivizing overseas Pakistanis to send remittances.
