Former Emerging Markets Investment Head and Chief Macro (EM) strategist Yusuf Nazar of Citygroup has written an article in the Financial Times. He said that due to increasing military tension, access to foreign capital markets and bilateral financeing could be endangered. This will make it difficult to repay the debt. The pressure on the store will increase. The IMF program may also derail due to geopolitical risk.
External debt will increase pressure
India on Wednesday attacked several terrorist bases in Pakistan and Pakistan Occupied Kashmir (POK) under ‘Operation Sindoor’. The attack was carried out on 22 April to avenge the killings in Pahalgam. On Thursday, the Indian Army also killed Pakistani drones and missiles.
Recently, Global Rating Agency Moody’s said that current stress could affect Pakistan’s IMF program. This will also increase the pressure of external debt.
Joseph Nazar wrote in her article that Pakistan’s economy, which was improving a little under the $ 7 billion IMF program, could collapse. The International Monetary Fund (IMF) Executive Board is scheduled to meet on 9 May to review the $ 7 billion bailout package for Pakistan.
Pakistan’s growth will affect
Moody’s also said in the report that increasing tension with India will affect Pakistan’s growth. The government’s financial reforms will also slow down. This will make it difficult to stabilize Pakistan’s economy.
According to reports, suspension of the 1960 Indus Water Treaty by India will affect Pakistan’s agricultural development. This will further weaken the country’s economy. Last year, there was a good growth of 6.25 per cent in the country’s agriculture.
Pakistani stock market earthquake
There is also an atmosphere of fear in Pakistan’s stock market. Pakistan’s benchmark KSE-100 index has fallen rapidly in the last two weeks. On 22 April, it fell from its highest level 118312 points to 103060.30 on 8 May. Investors are nervous due to increasing geopolitical tension. This has led to a decline of over 15,000 points.
On Thursday 8 May, Pakistan temporarily stopped trading in its stock market. The benchmark KSE-30 index declined by 7.2%, which was a huge loss for the second consecutive day.
Moody’s said in the report that India’s economy is expected to remain relatively stable with low trade with Pakistan (less than 0.5 per cent of total exports in 2024) and public investment and personal consumption.
Moody’s said that the economy will remain stable due to high growth rate between strong public investment and healthy personal consumption in India.
Overall, the increasing tension between India and Pakistan has put Pakistan’s economy in danger. Pakistan has low foreign exchange reserves. He has heavy debt. Increasing stress can make it difficult for him to get external help. This will also affect the IMF program. The stock market has declined. There is an atmosphere of fear among investors. At the same time, India’s economy is expected to remain stable.