The cross-border strains could affect Pakistan more than India
The global credit rating agency Moody's has sounded a note of warning regarding the economic implications of continued tensions between India and Pakistan. According to its study, Pakistan stands to be affected more than India by these events.
The agency added that Pakistan's economic growth could decelerate, and the government could find it harder to raise funds. Moody's also pointed to risks to Pakistan's external debt profile and foreign reserves.
Debt and Reserve Issues for Pakistan
- Pakistan's access to foreign loans might become more restricted.
- The foreign exchange reserves of the country are insufficient to cover debt obligations.
- Even in this scenario, Pakistan has to keep following IMF guidelines.
Indian Economy to Remain Steady Despite Local Challenges
Moody's reported that India's economy will remain robust. It forecasts steady growth fueled by efficient government expenditure and robust consumer demand.
- India's trade with Pakistan is extremely low.
- Only 0.5% of India's exports are to Pakistan.
- Hence, any disruption will have a small impact on India's economic activity.
Geopolitical Outlook Remains Guarded
Moody's does not foresee mass military confrontations between the two nations. Rather, it forecasts occasional limited conflicts as experienced before.
- Small-scale tensions can flare up.
- Long-term peace cannot be guaranteed.
- Economic relations, such as exports and port access, continue to be limited.
