What the Moody’s Investors Service says in its latest assessment of Pakistan’s economy sounds pretty heartening. According to the top US credit rating agency, Pakistan’s economic growth will — under the impact of the coronavirus pandemic — shrink much lesser than what the State Bank of Pakistan, the International Monetary Fund and the World Bank anticipate. Moody’s says it expects Pakistan’s real GDP to contract only modestly — by 0.1-0.5% in the ongoing fiscal year — as against extremely worrying predictions made by the mentioned financial institutions, including the World Bank that sees Pakistan’s economic growth rate falling into a negative zone.
The Moody’s encouraging forecast is based on a few steps taken by the federal government to offset the impact of a month-long coronavirus lockdown in the country that has started easing from April 15. The first and foremost is the government’s permission to labour-intensive industries like agriculture, construction and textile to resume operations — something that is likely to aid a gradual recovery in domestic consumption.
Moody’s assessment also takes into account certain steps taken by the SBP which are expected to “further buffer the economic shock related to coronavirus”. These steps include bringing down the benchmark interest rate to 9% from 13.25% over a period of 30 days to provide cheaper working capital to the businesses in a bid to spur commercial activities; besides launching certain schemes for providing easy loans to industrial and construction sectors as well as to the owners of business concerns to help them retain their employees.
Further, Moody’s expects that a gradual revival in economic activities in Pakistan will help the country’s economy “to grow by more than 2%” in the next fiscal year. However, a lot will depend upon the government’s persistence with the ease in economic lockdown, given the fears that the coronavirus pandemic is all set to peak over the next couple of months.
Published in The Express Tribune, April 25th, 2020.