As India made deal with Britain, Pakistan gets promoted due to…., but who came to Islamabad’s rescue?
What comes as good news for Pakistan is that credit rating agency S&P Global Ratings has upgraded its sovereign credit rating to ‘B-‘ from ‘CCC+’ with a stable outlook. The agency improved Pak’s ratings, citing improved finances and foreign exchange reserves after financial assistance was given by the International Monetary Fund (IMF). However, S&P Global Ratings has also warned about the growing border dispute with India, stating that any conflict would adversely affect Pak’s credit rating.
Pressure On Pakistan Reduced
The global rating agency said that Pak’s improvement in the balance of payments has increased the foreign exchange reserves. However, the cost of debt is still very high. Notably, Pakistan’s economic situation is getting better because of Sharif government’s efforts to increase revenue and reduce inflation.
The agency stated that in the next 12 months, Islamabad will continue to receive external aid to repay its debt. However, if the neighbouring country’s external or financial position deteriorates, the rating agency will again reduce its rating. If the political situation improves in Pak, which promotes economic reforms and strengthens its financial position, the rating will improve further.
According to S&P, political instability will continue in Pakistan. The rating of the country is affected by domestic and external security risks.
It is also noteworthy that Pakistan’s security situation has improved since 2010, but there is also the possibility of a downgrade.
Warning About Tension On The Border With India
The global rating agency has warned Pakistan about tensions on the border with India, stating that this could increase the risk of miscalculations and accidents. Any further conflict is likely to worsen the situation. If this happens, Pakistan’s credit profile will be adversely affected.
The IMF has given a package of USD 8.4 billion to Pakistan under the Extended Fund Facility (EFF) and Resilience and Sustainability Facility.
Notably, tensions between India and Pakistan escalated following the Pahalgam terror attack in May, which claimed 26 lives. In response, India launched Operation Sindoor, targeting terror hideouts in the neighbouring country, which led to a retaliatory attack by Islamabad.
Trade Agreement Between India And Britain
The ratings of Pakistan was improved on the same day when India has signed a historic agreement with Britain. India and Britain had signed a free trade agreement called Comprehensive Economic and Trade Agreement (CETA). Under the agreement, India will get tariff-free access to the British markets for its agriculture, marine products, textiles, engineering, electronics, pharmaceuticals.
The move is likely to increase Indian exports significantly. Not only this, many products will also become cheaper in India through the agreement.
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