MUMBAI: Ratings agency Moody’s Ratings has said it sees India’s macroeconomic conditions to be stable even if tension with Pakistan following the dastardly killing of 26 Hindu tourists in the Baisaran meadow of Pahalgam area of the Kashmir Valley believed to be by Pak terrorists, escalates.
However, it has warned Pakistan that sustained escalation in tensions with India will likely hit its already battered economy and also hamper the government’s ongoing fiscal consolidation.
The April 22 heinous murder has prompted a series of retaliatory moves by New Delhi including suspension of the Indus Waters Treaty of 1960 and closing the air space and ports for Pakistan among others. In response, Pakistan suspended the 1972 Simla peace agreement, halted bilateral trade and closed its airspace for Indian airlines.
“Sustained escalation in tensions with India would likely weigh on Pakistan’s growth and hamper its ongoing fiscal consolidation, setting back its progress in achieving macroeconomic stability.
“Pakistan’s macroeconomic conditions have been improving, with growth gradually rising, inflation declining and foreign-exchange reserves increasing amid continued progress in the IMF programme. But a persistent increase in tension can also impair Pakistan’s access to external financing and pressure its forex reserves which remain well below what is required to meet its external debt payment needs for the next few years,” Moody’s said in a note Monday.