|
Islamabad: The downgrading of Pakistan's sovereign rating on Thursday by Standard and Poor's (S&P) has resulted in fresh anxiety among equity stakeholders, who see this action preceding a downturn for their business interests.
For the players at Karachi Stock Exchange, the S&Ps action may well mark a significant turnaround to the several years of positive trend, which has made Karachi one of the most sought-after destinations for equity investors.
In citing its reasons for the downgrade, S&P said in a statement; "Following a year of turbulence accompanying Pakistan's transition to democratic rule, macroeconomic management and policy formulation remain significantly constrained by the precedence of political imperatives in the context of coalition and historical rivalry between the two main partners(the Pakistan People's Party (PPP) and the Pakistan Muslim League-Nawaz (PML-N)."
The assessment does not end there. "The negative outlook reflects our assessment that the sovereign's vulnerabilities may accentuate further, given that the emergence of a stable, cohesive and effective physical environment needed to tackle mounting macroeconomic imbalances doesn't seem to be at hand".
Agriculture
To an extent, S&P has a point, but the agency overlooks segments of Pakistan's situation. The south Asian country's economy is in significant part driven by output from its long neglected agricultural sector.
During the past five or six years when the KSE-100 index has gone from strength to strength, Pakistan's farming communities, who make up more than 60 per cent of the country's population, have suffered at the hands of continued neglect, as the government has ignored some of their most fundamental needs.
Even in the years that the agricultural sector has grown more than the previous year, that has come about largely either due to factors outside the government's control such as weather conditions, or from circumstances not of the government's making such as more private investments in the livestock sector.
There is indeed little to say by way of an obvious link between the stock market and Pakistan's agricultural sector. And yet, there can be no escape from the reality that Pakistan's government must concentrate a lot more on the rural economy to kick-start the overall economy.
If indeed the agricultural sector finds its fortunes significantly improved, there is a good chance that consumer spending from the rural areas is likely to grow.
As a result of this upturn and improvement in consumer spending, it is likely that the kind of stabilisation at the centre of S&Ps warning may indeed begin taking place.
- The writer is a journalist based in Pakistan.
|
