India-Pakistan tensions: Bankrupt Pakistan will be left with a ‘begging bowl’ if war happens due to…., Moody’s report reveals…

Amid the growing tensions between India and Pakistan, Moody’s Ratings has issued a major alert for the neighbouring country. According to the report, if this tension continues for a long time, Pakistan will suffer the most as its economy may suffer a major setback, which may also derail the government’s fiscal consolidation process. This can pose a major threat to Pakistan’s economic stability.

Crisis looming over foreign debt and forex reserves

Moody’s has warned that the current tension may affect Pakistan’s ability to obtain external funding. Also, the foreign exchange reserves it has may be insufficient to repay its external debt in the coming years. In such a situation, it may be difficult for Pakistan to get help from institutions like the IMF.

However, Moody’s also says that some improvements have been seen in Pakistan in recent times. The decline in inflation, slowly increasing GDP, and compliance with IMF conditions have certainly provided some relief. But these improvements are not sustainable as long as regional peace remains and tensions do not increase further.

India’s economic condition is strong and stable

Talking about India, Moody’s report says that India’s economy is growing strongly. India’s GDP growth remains stable, government investment is increasing and strong consumer spending is being seen in the domestic market. The biggest thing is that India’s trade with Pakistan is negligible (less than 0.5%), so the economic impact will be limited.

Defence spending may increase

Moody’s has warned that if the tension on the border increases, India may have to increase military expenditure. This may have a slight impact on India’s fiscal stability, but overall India’s economic condition will remain strong.

Strong response from India

After the Pahalgam attack, the Indian government has taken a tough stand at the economic and diplomatic level. All types of imports from Pakistan have been banned, even if it is coming through a third country. Postal service and parcel service have been suspended and Pakistani ships have been barred from entering Indian ports. Along with this, Indian ships are also not being allowed to enter Pakistani ports.

End of Indus Water Treaty and Shimla Agreement

India has suspended the 1960 Indus Water Treaty, which could have a major impact on Pakistan’s water rights. In response, Pakistan has also suspended the 1972 Shimla Agreement and halted bilateral trade with India. In addition, Indian airlines have been banned from flying through its airspace.

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