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Moody’s new rating

Moody’s new rating

 

Moody’s Investors Service has assessed the country’s credit profile in terms of economic strength as ‘moderate’, giving it B3 rating, which means the outlook of the economy is stable. However, the new analytic rating also points out various areas of concerns despite tall claims of the government that the economy has been put on the right track. The B3 issuer rating is a sign of economic strength and growth due to structural reforms in the face of debt burden and political risks. However, the rating agency assesses the institutional strength as very low, fiscal strength as minus and its susceptibility to event risk as very high. The agency says that the economy has been picking up in recent years and is still striding on a healthy path, but it has a large debt burden and low tax base. The very low institutional strength reflects weaknesses but indicators of the world donor agencies show that the country is improving it governance.

The agency also indicates a very cruel situation of the economy by pointing out analytic factors in methodology of the sovereign bond ratings. That is, the country has a large economy, but very poor per capita income. The officials have been claiming over and over again that the country will achieve 4.5 percent growth in the gross domestic product, but the rating agency says that the GDP growth has edged up to average 4.1 percent year-on-year since financial year 2014 from 3.4 percent during the previous four years. The minus assessment of fiscal strength shows that the country has large debt burden but weak revenue base. However, the agency says that low oil prices in the international market proved to be beneficial for the country’s economy and it is a chance to reduce fiscal deficit. The central bank has been keeping inflation within limits and maintaining monetary policy at acceptable level in recent years. However, the assessment also indicates high risk vulnerability due to political risks which the country is facing due to political situation at home and the region.

The central bank, the Finance Ministry and the tax authorities, all are sincere in achieving economic stability and growth. But the government has failed to stop leakages of the official funds and control unnecessary expenditures. The hard-earned taxpayers’ moneyis extravagantly spent on the non-productive sectors for political gains. Billions of rupees are spent on the presidency, the prime minister’s house, and other sectors which are the burden on the national economy. Billions of rupees can be saved by controlling expenditures and corruption in the official cadre. The assessment of rating agencies and warnings from donor agencies are blessing in disguise and are a kind of guidelines for the government to mend its ways.