Update (06th Feb 2020): Citing robust liquidity and funding, Moody’s Investors Service claimed that the credit profile of Pakistan has improved in the past months and the country’s banking system would have a stable economic outlook for the next 12-18 months.
“The sovereign credit profile has improved in recent months, benefiting the banks through their high exposure to government securities, which account for around 40% of their assets,” stated Moody’s Senior Vice President Constantinos Kypreos.
Backed by the recent wave of digitisation, Pakistan is now one of the fastest-growing economies in the world. With Lahore beating London and Washington DC in World Crime Index, another good news about Pakistan is making headlines across the globe. According to a recent development, the US-based agency Moody’s, upgraded Pakistan’s economic outlook to ‘stable’ after observing that the country has paid a large chunk of foreign debt off. “The change in outlook to stable is driven by Moody’s expectation that the balance of payments dynamics will continue to improve, supported by policy adjustments and currency flexibility,” said Moody’s Investor Service.
In this blog, we are going to discuss some of the key factors and developments that have caused Pakistan’s credit ratings to go up and how they will help Pakistan progress and prosper.
Quick Fact: Moody’s Corporation is an internationally recognised credit rating agency, which is headquartered in New York City.
US-Based Agency Moody’s Upgraded Pakistan’s Economic Outlook to Stable – Is It the Right Time to Invest?
Owing to the recent rise in Pakistan’s credit rating by the international agency, investors from all around the world have started eyeing the country’s economy, which is all geared up for robust long-term growth. So, let’s list down and discuss some of the most significant recent developments that are causing Pakistan’s economic engine to go full throttle:
- Sky-Rocketing Stock Market and Increase In Foreign Currency Reserve
- Reforms for Ease of Doing Business in Pakistan
- Centralised National Payment Strategy by SBP
- Reforms in the Automotive Industry
- Youth Empowerment Programmes
- Special Economic Zones
- Startups and Freelancing in Pakistan
- Growth of Property Market in Pakistan
Sky-Rocketing Stock Market and Increase In Foreign Currency Reserve
As soon as the international investment rating agency Moody’s upgraded Pakistan’s Economic Outlook to Stable, Pakistan’s stock market reached the high of 40,000 points for the first time in ten months. Setting a new precedent, the country’s stock exchange surged from 836.57 points to 40,124.22 points. Furthermore, according to the State Bank of Pakistan, an official inflow of $240 million caused the foreign currency reserves of the country to increase to $8.68 billion in the last month.
Reforms for Ease of Doing Business in Pakistan
Now on the 108th spot, Pakistan has successfully jumped 28 spots ahead on World Bank’s Ease of Doing Business Index 2020 as the country was previously in 136th position. Moreover, the country has successfully secured 6th position in the list of the 10 best business climate improvers in the world. It is all because of the recently introduced ‘ease of doing business in Pakistan’ reforms that have not only simplified the process of starting a new business but also have made it less time-consuming and more transparent. This will further strengthen the economy of Pakistan.
Centralised National Payment Strategy by SBP
The State Bank of Pakistan’s new National Payment System Strategy is purposed to monitor, facilitate, and improve the digital payment system in the country. Its proper implementation is expected to create four million new employment opportunities, which according to an estimate, will lift up the country’s GDP by seven percent by netting as much as $263 billion in new deposits till 2025. With the launch of the National Payment System Strategy, the State Bank of Pakistan, in collaboration with the federal government, is also making an effort to introduce a low-cost home remittance service, which might result in increased inflow of foreign currencies in Pakistan.
Reforms in the Automotive Industry
A new policy, which will be implemented from 2022, will be structured in a way to help boost the local auto industry by offering them more incentives and tax reductions to set up new manufacturing plants and assembly lines across the country. It is expected that more such incentives will be offered to local automakers. The current auto policy also turned out to be very successful as it promoted the auto sector of the country by encouraging automakers from around the world to invest and create new employment opportunities to boost the economy of Pakistan.
Youth Empowerment Programmes
Certain youth empowerment initiatives have been introduced by the federal government in recent years. PM’s Kamyab Jawan Programme, Youth Empowerment Card, and the PM’s Laptop Scheme are some of the noteworthy examples in this regard. With nearly 64% of the total population under the age of 30, the role of youth is very significant in terms of Pakistan’s social and economic uplift. However, Pakistan is still in need of more multi-pronged strategies to create a facilitating environment for the youth to harness its potential to the fullest.
Special Economic Zones
In order to effectively boost the creation and influx of socio-economic opportunities, the government of Pakistan is now focused on the fast-track development of Special Economic Zones, which are going to be a part of the China-Pakistan Economic Corridor, which is a multi-billion dollar initiative aimed at creating and enhancing an effective trade corridor in the region. Some of the proposed Special Economic Zones include Rashakai Economic Zone , M-1, Nowshera, China Special Economic Zone, Dhabeji Bostan Industrial Zone, Allama Iqbal Industrial City (M3), Faisalabad, ICT Model Industrial Zone, Islamabad, Development of Industrial Park on Pakistan Steel Mills Land at Port Qasim near Karachi, Special Economic Zone at Mirpur, AJK, Mohmand Marble City, and Moqpondass SEZ Gilgit-Baltistan.
Quick Fact: Generally, a special economic zone (SEZ) in a country is created to attract foreign direct investment (FDI). SEZs are purposed to increase trade balance, investment, and creation of employment opportunities with the help of special economic regulations that may be different from the business and trade laws in other regions of the same country.
Startups and Freelancing in Pakistan
A large chunk of the population of Pakistan comprises youth. Over 112 million souls living in this country are under the age of 25. With so many young professionals, some of which are making the best use of advanced technologies and high-speed internet to earn a fortune, Pakistan is on the road to becoming the largest untapped market in the world. Freelancing in Pakistan has witnessed growth at an unbelievable pace. With the startup industry raking in millions of dollars, Pakistan has now become the third most popular country in the global freelance market, according to a recent report released by the State Bank.
Keeping in view the sizable growth of the startup industry in Pakistan with hundreds of local tech-based companies emerging every year, the government of Pakistan, in collaboration with The National Business Development Programme (NBDP), has launched the SME capacity-building initiative country-wide. The purpose of this initiative is to facilitate startups and individuals seeking opportunities for doing business.
Growth of Property Market in Pakistan
Considered as a significant investment opportunity in Pakistan, the real estate sector has witnessed a remarkable growth in recent times. Some of the key reasons behind the rapid growth of the property market in Pakistan include a constant increase in the need for urban land, overseas investment, economic stability, and improved security situation. Furthermore, the real estate trend of living in a gated community has also picked up pace in Pakistan.
With a presence in the three major cities of Pakistan: Karachi, Lahore, and Islamabad, Bahria Town is one significant example in this regard. Also, the online availability of property listings along with cutting-edge search tools like we see on the platform of Zameen.com has given more control to property seekers, and have made it easier for them to hunt and invest in the property of their choice.
Ever since the New York-based credit rating agency Moody’s upgraded Pakistan’s economic outlook to stable, there has been a new wave of excitement in the country’s financial sector, the potential of which is yet to be fully explored. Meanwhile, if you want to engage with us in an informative discussion or want to share your valuable feedback about any of our blogs, feel free to write to us at blog@gmail.com. We’d be glad to hear from you. Also, don’t forget to share this exciting news with your family and friends.
Home to a whole lot of hidden tourist attractions, Pakistan is an amazing country to explore. If you are also looking to explore the highly scenic beauty of the country, then you can take help from our blog in which we have discussed the entire process of acquiring a tourist visa for Pakistan.
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