And not-so-happy rating agencies
It seems Moodys has a special liking for Nawaz Sharif. The (now former) PM’s just been shown the door and the rating agency is immediately concerned about our deficit, exports, even our ability to borrow in the international market, even though the de facto ‘czar of the economy’ is back in the saddle. One reason is that the B3 ‘stable outlook’ rating banked on Dar sb keeping a lid on a deficit already in red, breathing life into export earnings long since dead and, of course, staying credit worthy enough to borrow left, right and centre.
But with the finance minister refusing all prescriptions except his Darnomics novelty, a strong rupee and no value-add in exports – while imports increased feverishly and remittances dropped – led instead to the trade deficit rising about 50pc last fiscal, paralysing the current account. And the only attempt to take some steam out of the rupee was not only bungled by the state bank, but also instantly crushed by the finance ministry, which should have no jurisdiction in the money market to begin with. But this was happening right under Nawaz’s nose, when Moody’s appreciated our ‘macroeconomic stability’ in its reports.
Perhaps financial institutions are more worried about the uncertainty caused by Nawaz’s ouster. It’s still not clear how the Supreme Court’s decision – now disputed by a constantly swelling bloc – will play out in the medium to long term. And the one thing markets dislike even more than bad news is uncertainty. It drives away not just investors but, more seriously in cases like Pakistan, also loans and grants – the life and blood of our ‘stable outlook’ economy. And should the outside money dry up, we’ll simply be unable to earn enough to function on our own. Hopefully the new PM will have an answer.