Pak Has More To Worry Than India: Moody’s

New Delhi: Moody’s Ratings on Monday said sustained escalation of tensions between India and Pakistan will not have any major economic disruption in the country, but will be a setback for Islamabad as its forex reserves could come under pressure and weigh on growth.In its commentary titled ‘Escalating Pakistan-India tensions would weigh on Pakistan’s growth’, Moody’s said it does not expect major disruptions to India’s economic activity because it has minimal economic relation with Pakistan (less than 0.5% of India’s total exports in 2024).

On April 22, 26 people were killed after terrorists opened fire on tourists in Pahalgam, Jammu & Kashmir. India has identified five terrorists, including three Pakistani nationals, behind the massacre in Pahalgam and has pledged to take action against the perpetrators of the heinous act. “Sustained escalation in tensions with India would likely weigh on Pakistan’s growth and hamper the government’s ongoing fiscal consolidation, setting back Pakistan’s progress in achieving macroeconomic stability,” Moody’s said.

Pakistan’s macroeconomic conditions have been improving, with growth gradually rising, inflation declining, and foreign-exchange reserves increasing amid continued progress in the IMF programme.

“A persistent increase in tensions could also impair Pakistan’s access to external financing and pressure its foreign-exchange reserves, which remain well below what is required to meet its external debt payment needs for the next few years,” Moody’s said.

The Executive Board of the International Monetary Fund (IMF) is scheduled to meet Pakistani officials on May 9 to evaluate a fresh $1.3 billion funding arrangement for Pakistan under its climate resilience loan programme. It will also assess an ongoing $7 billion bailout package.

Sources have said that India will be asking global multilateral agencies, including the IMF, to re-examine funds and loans provided to Pakistan. Moody’s said the macroeconomic conditions in India would be stable, bolstered by moderating but still high levels of growth amid strong public investment and healthy private consumption.