ISLAMABAD: Pakistan’s economy is now in a better position to withstand global and regional economic challenges, according to Grace Lim, Assistant Vice President at Moody’s.
In her assessment of Pakistan’s economic outlook, Grace Lim said the country’s economy was stronger than it had been during the oil crisis of 2022. She added that if tensions surrounding the Strait of Hormuz developed into a crisis, the impact on Pakistan would likely be less severe than it was in 2022.
Lim said Pakistan had achieved greater economic stability over the past two years, improving its ability to deal with external shocks and international economic uncertainty.
According to the Moody’s official, the stabilization achieved during this period has strengthened Pakistan’s economic resilience. She said the country was now better prepared to manage global and regional challenges than it had been several years ago.
Lower Inflation and Stable Exchange Rate
Lim identified relatively low inflation and a stable exchange rate as two of Pakistan’s key economic strengths.
She said the improvement in Pakistan’s foreign exchange reserves was also providing the country with important economic buffers. Stronger reserves can help a country manage external financing pressures, support imports and provide greater protection against international economic shocks.
The improvement in reserves is particularly important for Pakistan because the country has historically faced pressure on its external account during periods of high energy prices and global market volatility.
According to Lim, the progress made over the past two years has improved the country’s capacity to absorb such shocks.
Impact of a Potential Hormuz Crisis
The Moody’s assessment also considered the potential impact of a crisis involving the Strait of Hormuz, a strategically important global energy route.
Pakistan is a significant importer of energy, meaning a major disruption to international oil supplies or a sharp increase in crude prices could place pressure on its import bill and external finances.
However, Lim said Pakistan is currently in a stronger position than it was during the 2022 oil crisis. The economic improvements achieved during the past two years mean that a potential external shock would be less damaging than it might have been previously.
She emphasized that Pakistan’s improved economic position does not eliminate the risks posed by international developments, but it does provide greater capacity to deal with them.
Economic Stability Over the Past Two Years
Lim said Pakistan had achieved economic sustainability and greater stability over the past two years.
The stabilization process has helped strengthen the country’s ability to respond to external challenges, she noted. Improvements in inflation, exchange-rate stability and foreign exchange reserves have collectively created stronger economic buffers.
Pakistan has faced several major economic difficulties in recent years, including high inflation, pressure on foreign exchange reserves, elevated energy costs and external financing requirements. The stabilization of key economic indicators has therefore been an important development for policymakers.
The Moody’s assessment suggests that the progress made since the period of severe economic stress has improved Pakistan’s resilience.
Better Prepared for External Shocks
Lim said Pakistan was now better prepared to deal with both global and regional economic challenges.
She attributed this improved position to the economic stability achieved during the last two years and said the country’s ability to confront future challenges had strengthened.
However, Pakistan remains exposed to developments in international energy markets, global interest rates, geopolitical tensions and changes in external financing conditions.
Any prolonged disruption in global oil supplies could still affect countries that depend heavily on energy imports. Nevertheless, according to Lim, Pakistan’s stronger economic buffers mean it is better equipped to manage such pressures than it was during the 2022 oil crisis.
The Moody’s assessment provides a relatively positive view of Pakistan’s current economic position, highlighting the progress made in stabilizing the economy.
Grace Lim’s remarks also underscore the importance of maintaining low inflation, exchange-rate stability and adequate foreign exchange reserves. Continued improvements in these areas could further strengthen Pakistan’s ability to absorb external shocks.
Overall, Moody’s considers Pakistan to be in a stronger position than it was two years ago, with improved economic stability and greater buffers against global uncertainty.
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