Not so positive anymore
With Moody’s downgrading Pakistan’s outlook to negative, the current account deficit bloating to $6b, the rupee in free fall, the stock market tanking, ADB cancelling a multi-million-dollar privatisation loan and the FATF verdict just around the corner, there’s not much good news coming from the economic front, to say the least. How distant 2016 feels now, when MSCI upgraded Pakistan to emerging market and the local bourse became the best performing regional player. But it only took the next year’s politics to demonstrate just how quickly hot money can pack up and leave; and PSX ended 2017 as the worst performing market in the whole world.
All the while Pakistan’s snowballing deficit, insufficient reserves and chronic reliance on borrowed money rang alarm bells from the press to the national assembly, yet the PML-N government counted on its mega projects with high visibility to win the argument. And, not quite unexpectedly, its house of cards began unraveling just as soon as its government’s time expired. Moody’s downgrade will resonate loudly with senior investors in financial havens looking for reliable emerging markets to park their investments. Yet even as foreign markets begin closing to Pakistan’s nearly insolvent economy, there are not many options open to the government except all out borrowing, as always – in effect simply kicking the can further down the road.
And SECP could have been less lazy in putting together its new set of regulations to satisfy FATF. With the review only days away, the Board would already have prepared a decision in light of its findings. And since the Commission did not act promptly – even though all it eventually did was collect scattered notifications into one circular – we cannot exactly lay all the blame at the FATF’s door. The economy, simply put, is on crutches. And the caretaker government has neither the time nor the mandate to address it. To make things worse, it does not look as if anything will improve till the next administration takes over.