The B’s and C’s of our financial standing
Every little penny counts when it comes to the financials of a household. And everything, howsoever small, counts when it comes to a country’s financials. One such thing is the reputation or standing of a country, financially, before the world. And who decides this standing is the job of a few ratings companies. If they say you have got something, you’ve got money rolling in, but if they say you are not doing well, the money stream starts running dry pretty soon.
The Standards and Poor’s ratings agency has lowered Pakistan’s credit ratings to a B- for long term and a C for short term credit ratings. This in no way bodes well for Pakistan. The agency did not go easy in laying out the reasons as to why it has done so. The country’s poor governance and a tripartite tussle between the executive, the judiciary and the army are the culprit here, the S&P says. What it will translate into is alarming: even lower foreign investment, higher interest rate on government bonds in the international market and weakening trust of investors. There is then this added baggage of a constant fear that the market may come crumbling down on its feet if anything untoward happens on the political horizon – say PM Gilani has to resign over the contempt case he is facing currently.
A bludgeoning current fiscal deficit and dying out foreign direct investment form a perfect formula to undo even the semblance of a stable economy with foreign reserves of over $17 billion and an increase in foreign remittances. Without an environment that is market friendly, political stability, and simplified investment procedures, the current downward spiral will be hard to arrest.
Memogate, the non-writing of the letter to the Swiss authorities and various other corruption scandals get a new meaning in this backdrop. Each one of them has the potential to push away investors, and with our foreign aid already dwindling, we do not have many options. The only way this can be changed is by improving the current security situation and by offering a more stable and risk-free investment environment.
