New Delhi: Amid tensions between India and Pakistan over the dastardly terror attack, Moody’s Ratings on Monday said sustained escalation Indian economy will not witness have any major disruption, but Islamabad will face the brunt as 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 any escalation between the two Asian neighbours would not result in major disruptions to India’s economic activity because it has minimal economic relations with Pakistan.
“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.
The credit ratings agency mentioned that the money released by the International Monetary Fund for Pakistan has resulted in the country’s macroeconomic conditions improving and foreign reserves increasing. The country’s inflation has also been easing 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.
Tensions between India and Pakistan escalated after terrorists killed 26 tourists in Pahalgam, Jammu & Kashmir. India has claimed five terrorists, including three Pakistani nationals, were behind the attack in Pahalgam. The Indian government has assured to take strict action against the perpetrators of the heinous act.
Commenting on the possibility of any sustained escalation between the two countries, Moody’s stated that it doesn’t expect any major disruptions to India’s economic, however, “higher defence spending would potentially weigh on India’s fiscal strength and slow its fiscal consolidation.”
Moody’s has a ‘Caa2’ rating on Pakistan. This type of raying is given to countries where the debt issued by the sovereign is of poor quality with very high default risks. India has a ‘Baa3’ rating from Moody’s.
Amid heightened India-Pakistan tensions following a recent terrorist attack, Moody’s assesses the economic ramifications. While India’s economy is predicted to remain largely unaffected due to minimal bilateral trade, Pakistan faces significant risks. Economy Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
