- Problems all around
Fitch Ratings could have picked a better moment, from PTI’s point of view at least, for downgrading Pakistan’s long term debt rating. After all the trauma that the market has experienced over the last hundred or so days, not to mention painful decisions like repeated devaluations and interest rate hike, this is not exactly the message the government wanted to send to foreign investors. Moody’s was not much more flattering a few days earlier; they did not downgrade the rating but expressed similar concerns about the debt. It is simply unsustainable as things stand.
Sure, the market picked up 500-plus points on Friday because the second tranche of the Saudi bailout package was received at the central bank. But it is more likely to react to the downgrade when it opens next week, not the least because the Saudi help was already priced into the market. Clearly international agencies, which provide the proverbial cue to foreign investors, are not impressed by the foreign help so far. With reserves currently below $8b there’s just no way that one, two or three billion can make much difference. That is why practically all foreign analysis has ruled out any viable option other than the Fund.
The finance minister needs to do a better job of calming nerves. The prime minister has tried and failed. His pep talk to PSX officials lifted the market’s mood for a day, but then it dipped for three straight days till the Friday breather. The reason, once again, is uncertainty about the road ahead. There is some weight in the opposition’s concerns as well that Asad Umer is seen readily explaining things to the foreign media, but he’s yet to explain the devaluation and chances of an IMF program in the Senate.
Everybody understands that it will be a while before we can resume the old, high growth trajectory, But, in the meantime, it is the government’s main responsibility to ensure transparency in all its actions.
