Islamabad:
Moody’s, a global credit rating agency, asked Tuesday about the implications of losing a key goal to increase the relationship imposed to 10.6% in the last fiscal year, since Pakistan made an emphatic tone for an ascending review in the current junk rating.
The credit rating agency also asked about the progress in commercial conversations with the United States and if the Central Bank was still exercising any control over imports and the exchange market market, according to officials aware of the details of the meeting.
Moody’s raised these questions during a session with Pakistan finance minister, Muhammad Aurengzeb. The Minister of State for Finance, Bilal Kayani and the State Bank of the governor of Pakistan, Jameel Ahmad, also attended the session, which would determine if the qualification agency would update Pakistan in his next announcement.
Pakistan’s current Moody’s qualification is Caa2 with a positive perspective. This qualification was updated from CAA3 with a stable perspective in August 2024. But it is still below the investment grade and hinders entry without Pakistan problems in international capital markets to increase debt.
According to officials, Moody’s asked about the impact of losing the relationship imposed on GDP in the last fiscal year in the objectives of this fiscal year. Aurengzeb said that the Federal Income Board (FBR) would give an informative session separately to the qualification agency to address any of its concerns, according to officials.
The FBO’s imposed on GDP relationship remained in a little more than 10.2% compared to the 10.6% objective after the FBR could only group RS11.745 billion taxes in the fiscal year 2024-25. The Government lost the annual tax collection objective by a margin of RS1.225 billion.
After the meeting that the Moody team received a comprehensive general vision of the Pakistan reform trip, with a particular emphasis on improving the relationship imposed on GDP through fiscal administration reforms promoted by technology, digitalization of solid systems and measures.
The minister emphasized that under the direct supervision of the Prime Minister, who presides over regular meetings on tax reform, the government was implementing measures to expand the tax base, plug the leaks and improve compliance. Aurengzeb said that the RS2 income delta billion revenue achieved this year had passed through autonomous efforts, and the government was firmly committed to reaching a PBD tax target from 13 to 13.5% in the coming years, according to the Ministry.
Moody’s also asked about the details of the commercial conversations of Pakistan-United States, but the government did not share any details, except that the agreement was expected soon. The sources said that the United States has requested a preferential commercial treatment that Pakistan has proposed to sign a pact.
“Ongoing discussions were observed with the United States on preferential tariff access such as an encouraging advance,” said the Ministry of Finance after the meeting.
There were also questions about the average interest rate that the Government used to assign the 8.3 billion RS8.3 for debt service for this fiscal year. Moody’s was informed that an average interest rate of 12% for this fiscal year had been used.
Moody has asked about the movement in the exchange rate and any import restriction. The Central Bank clarified that the exchange rate was determined and there were no import restrictions.
The rupee has begun to be under pressure and the gray market is resurfaceing with a rate that is approximately RS7 per dollar higher than the interbank rate, according to the distributors of the Exchange market.
According to the Ministry of Finance, the Finance Division provided an in -depth informative session on the macroeconomic perspective, the Pakistan reform and financial stability.
“Looking towards the future, the Minister of Finance expressed optimism that the improvement of macroeconomic indicators and the impulse of the reform would be positively recognized by the qualification agencies, even more strengthening the case of Pakistan to take advantage of international markets and deepen their stability of the external sector,” said the ministry.
Aurengzeb and his team presented convincing evidence of macroeconomic recovery, including a strong reduction in inflation, a cut in the policy rate, the stabilization of the exchange rate, a current account surplus and an increase in currency reserves, which crosses $ 14 billion at the end of June, the ministry declared.
He added that improvements in remittance entries and export performance were also cited as signs of resilience and renewed investor’s trust.
During the session, the finance minister informed the Moody’s team of the important steps that Pakistan has made when stabilizing his economy and laying the foundations for sustainable and inclusive growth, he added.
He stressed the successful completion of the final review of the International Monetary Fund (IMF) under the waiting agreement, including the disbursement of the second section and progress under the center of resilience and sustainability (RSF), as key milestones that have restored the confidence in Pakistan’s economic management.
The minister highlighted a series of structural reforms made by the Government to anchor long -term stability. These included prudent fiscal measures in the recently announced budget, tariff and liberalization of trade aimed at growth led by exports and efforts to rationalize the expense.
The meeting further described the resuscitation of Pakistan with the global financial markets, including the successful agreement of $ 1 billion in commercial financing of the Middle East region, the plans for an inaugural Panda bonus and Pakistan’s intention to explore the Eurobones debt markets and other international debt markets as credit qualifications improve.
The Minister of Finance also addressed consultations of the Moody’s team and reiterated Pakistan’s commitment to maintain the course on macroeconomic reforms, even in areas of privatization, restructuring of state companies (SOE) and the correct size of the government.
