{"id":35719,"date":"2022-04-12T18:34:02","date_gmt":"2022-04-12T13:04:02","guid":{"rendered":"https:\/\/tradebrains.in\/features\/pak-economy-moodys\/"},"modified":"2022-04-12T21:12:50","modified_gmt":"2022-04-12T15:42:50","slug":"pak-economy-moodys","status":"publish","type":"post","link":"https:\/\/tradebrains.in\/features\/pak-economy-moodys\/","title":{"rendered":"Pakistan&#8217;s policy continuity in doubt, says Moody\u2019s"},"content":{"rendered":"<div class=\"trade-content_2\" style=\"margin-left: auto;margin-right: auto;text-align: center;\" id=\"trade-1360104580\"><p><a href=\"https:\/\/tradebrains.in\/get\/telegram\/\"><img decoding=\"async\" class=\"alignnone wp-image-101992\" src=\"https:\/\/tradebrains.in\/features\/wp-content\/uploads\/2023\/01\/telegram-channel-300x119.png\" alt=\"\" width=\"148\" height=\"59\" \/><\/a> <a href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMN3Epgswxc--Aw?hl=en-IN&amp;gl=IN&amp;ceid=IN%3Aen\"><img decoding=\"async\" class=\"alignnone wp-image-123430\" src=\"https:\/\/tradebrains.in\/features\/wp-content\/uploads\/2024\/05\/follow-on-google-news-300x82.png\" alt=\"follow-on-google-news\" width=\"222\" height=\"61\" srcset=\"https:\/\/tradebrains.in\/features\/wp-content\/uploads\/2024\/05\/follow-on-google-news-300x82.png 300w, https:\/\/tradebrains.in\/features\/wp-content\/uploads\/2024\/05\/follow-on-google-news-150x41.png 150w, https:\/\/tradebrains.in\/features\/wp-content\/uploads\/2024\/05\/follow-on-google-news.png 468w\" sizes=\"(max-width: 222px) 100vw, 222px\" \/><\/a><\/p>\n<\/div><p>Islamabad, Apr 12 (PTI) Moody\u2019s Investors Service has highlighted cash-strapped Pakistan\u2019s \u201csignificant uncertainty over policy continuity\u201d and falling foreign exchange reserves even as the Pakistan Stock Exchange and the rupee made a steep recovery after Shehbaz Sharif was sworn-in as the new Prime Minister, bringing to an end the political uncertainty in the country.<\/p><div class=\"trade-content_7\" style=\"margin-left: auto;margin-right: auto;text-align: center;\" id=\"trade-2701835671\"><!-- Composite Start --> \r\n <div id=\"M923760ScriptRootC1549812\"> \r\n <\/div> \r\n <script src=\"https:\/\/jsc.mgid.com\/t\/r\/tradebrains.in.1549812.js\" async> \r\n <\/script> \r\n <!-- Composite End --><\/div>\n<p>However, the New York-based credit rating agency forecast a stable outlook for Pakistani banks and estimated the country\u2019s gross domestic product (GDP) growth rate to remain between three and four per cent, the Dawn News reported.<\/p>\n<p>Commenting on the ouster of former prime minister Imran Khan through a no-confidence vote and the subsequent confirmation of Sharif as the country\u2019s new premier until August 2023, Moody\u2019s said that \u201cthe political upheaval reflects the volatility that besets Pakistan\u2019s political environment and raises significant uncertainty over policy continuity, at a time when Pakistan is encumbered with surging inflation, widening current account deficits and declining foreign-exchange reserves\u201d.<\/p>\n<p>It said it was unclear how the new government would approach the International Monetary Fund&#8217;s (IMF) programme during this interim period before the next election is called, prolonging the uncertainty around whether Pakistan would be able to secure financing from the IMF to bolster its foreign-exchange reserves, which have fallen to a level sufficient to cover only about two months of imports.<\/p><div class=\"trade-content_5\" id=\"trade-1761401770\"><script async src=\"https:\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js?client=ca-pub-4023722985638610\"\r\n     crossorigin=\"anonymous\"><\/script>\r\n<!-- in_content_2_news -->\r\n<ins class=\"adsbygoogle\"\r\n     style=\"display:block\"\r\n     data-ad-client=\"ca-pub-4023722985638610\"\r\n     data-ad-slot=\"7925020301\"\r\n     data-ad-format=\"auto\"\r\n     data-full-width-responsive=\"true\"><\/ins>\r\n<script>\r\n     (adsbygoogle = window.adsbygoogle || []).push({});\r\n<\/script><\/div>\n<p>Meanwhile, it said the banks\u2019 stable outlook was supported by an expanding economy and their sound finances and hence maintained a stable outlook for the banking sector (B3 stable).<\/p>\n<p>Moody\u2019s expected real GDP growth of between 3 per cent and 4 per cent for the ongoing fiscal year and between 4 per cent and 5 per cent for the 2023 fiscal year, with credit growth surpassing 12 per cent.<\/p>\n<p>Pakistani banks successfully navigated the pandemic, although nonperforming loans (NPLs) remained high but broadly stable at around 9 per cent of gross loans, it said.<\/p>\n<p>Profitability will rise moderately, with returns on assets to remain around 1 per cent to 1.1 per cent, supported by new business generation and gradually recovering net interest margins. However, investment gains are likely to be lower.<\/p>\n<p>Dividend payouts are expected to rise this year, but earnings should be sufficient to keep capital at current, rather modest, levels. Pakistani banks will remain deposit funded and liquid.<\/p>\n<p>These are credit strengths, but their high exposure to Pakistan government securities means their credit profiles are anchored to the low-rated sovereign. Operating conditions will be supportive for banks, despite new pressures. The Russia-Ukraine military conflict will pressure Pakistan\u2019s current account deficit via higher oil prices, while rising inflation will weaken private-sector spending. Sharp increases in interest rates will also weigh on private-sector investment.<\/p><div class=\"trade-content-10\" id=\"trade-2376665598\"><script async src=\"https:\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js?client=ca-pub-4023722985638610\"\r\n     crossorigin=\"anonymous\"><\/script>\r\n<!-- in_content_3_news -->\r\n<ins class=\"adsbygoogle\"\r\n     style=\"display:block\"\r\n     data-ad-client=\"ca-pub-4023722985638610\"\r\n     data-ad-slot=\"2969612066\"\r\n     data-ad-format=\"auto\"\r\n     data-full-width-responsive=\"true\"><\/ins>\r\n<script>\r\n     (adsbygoogle = window.adsbygoogle || []).push({});\r\n<\/script><\/div>\n<p>The GDP growth forecast is based on expectations of a reform agenda and the China-Pakistan Economic Corridor (CPEC) helps boost economic growth. Also, government support for specific sectors, such as a subsidy scheme for housing finance, and subsidised interest rates and partial credit guarantees for small businesses and agriculture, will also boost credit demand.<\/p>\n<p>\u201cAsset risk is mainly linked to banks\u2019 high exposure to government securities. Pakistani banks\u2019 exposure to government securities accounts for 45 per cent of their total assets and around seven times their equity, one of the highest levels among our rated banks globally. This exposure links their credit profiles to the sovereign\u2019s. After a moderate rise in problem loans during the pandemic, we now expect these to stay around 9% of gross loans for the rated banks,\u201d Moody\u2019s said.<\/p>\n<p>Loans to sugar, textiles and leather, and electronics sectors will be the most vulnerable. The phased introduction of the new IFRS-9 accounting standard containing stricter rules on loan-loss provisioning will likely increase provisioning needs.<\/p>\n<p>Capital buffers will be stable but modest. According to data from the State Bank of Pakistan (SBP), the banking sector\u2019s capital-to-assets ratio stood at 6.3 per cent as of December 2021. The sector\u2019s reported Tier-1 capital stood at 13.5 per cent of risk-weighted assets.<\/p>\n<p>\u201cOnce we risk-weight government securities at 100 per cent in line with the government\u2019s B3 credit rating, however, tangible common equity (TCE) to adjusted risk-weighted assets drops to a modest 7.4pc for the rated banks,\u201d it said.<\/p>\n<p>The SBP has also introduced additional Shariah-compliant liquidity facilities for Islamic banks. Some pressure points remain but these will be manageable.<\/p>\n<p>The introduction of a Treasury Single Account will lead to modest deposit outflows and Pakistan\u2019s inclusion on the Fina\u00adncial Action Task Force\u2019s (FATF) grey list of countries with deficient anti-money laundering regimes is being addressed with 26 out of the 27 actions required already completed, according to the Dawn report. PTI SH  PMS PMS<\/p>\n<div class=\"trade-after-content\" id=\"trade-984853678\"><div id=\"taboola-below-article-thumbnails\"><\/div>\r\n<script type=\"text\/javascript\">\r\n  window._taboola = window._taboola || [];\r\n  _taboola.push({\r\n    mode: 'alternating-thumbnails-a',\r\n    container: 'taboola-below-article-thumbnails',\r\n    placement: 'Below Article Thumbnails',\r\n    target_type: 'mix'\r\n  });\r\n<\/script>\r\n<script type=\"text\/javascript\">\r\n  window._taboola = window._taboola || [];\r\n  _taboola.push({flush: true});\r\n<\/script><\/div>","protected":false},"excerpt":{"rendered":"<p>Islamabad, Apr 12 (PTI) Moody\u2019s Investors Service has highlighted cash-strapped Pakistan\u2019s \u201csignificant uncertainty over policy continuity\u201d and falling foreign exchange reserves even as the Pakistan Stock Exchange and the rupee made a steep recovery after Shehbaz Sharif was sworn-in as the new Prime Minister, bringing to an end the political uncertainty in the country. However, [&hellip;]<\/p>\n","protected":false},"author":13,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[1697,31],"tags":[],"class_list":["post-35719","post","type-post","status-publish","format-standard","hentry","category-economy","category-news"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v20.5 (Yoast SEO v25.0) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Pakistan&#039;s policy continuity in doubt, says Moody\u2019s - Trade Brains Features<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/tradebrains.in\/features\/pak-economy-moodys\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Pakistan&#039;s policy continuity in doubt, says Moody\u2019s\" \/>\n<meta property=\"og:description\" content=\"Islamabad, Apr 12 (PTI) Moody\u2019s Investors Service has highlighted cash-strapped Pakistan\u2019s \u201csignificant uncertainty over policy continuity\u201d and falling foreign exchange reserves even as the Pakistan Stock Exchange and the rupee made a steep recovery after Shehbaz Sharif was sworn-in as the new Prime Minister, bringing to an end the political uncertainty in the country. 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