Debt-ridden Pak tests missile, ignoring Moody’s warning: Can its economy withstand?

On April 22, 26 tourists were killed in one of the worst attacks on civilians in India in nearly 20 years. India blamed Pakistan for the violence, but Pakistan denied involvement. However, Islamabad claimed it had intelligence suggesting that India was planning a military strike.

In response to the growing tensions, Pakistan launched a surface-to-surface missile named “Fatah” with a range of 120 kilometres. On Saturday, Pakistan tested Abdali missile, which has a longer range of 450 kilometres. The Pakistani army said the missile test was successful.

Prime Minister Shehbaz Sharif praised the launch and said, “This successful test makes it clear that Pakistan’s defence is in strong hands.”

Diplomatic relations between the nuclear-armed neighbours are at a boil following an attack targeting Hindu tourists in Kashmir, killing 26 on April 22.

MOODY WARNS OF ECONOMIC SETBACK

The military level strain is increasing between the two neighbouring countries. Concerns regarding Pakistan’s economy are also on the rise. The international credit rating agency Moody cautioned that ongoing conflict would damage the country’s economic recovery.

Pakistan only recently began to stabilise its economy after the International Monetary Fund (IMF) provided it with a $7 billion loan package last year.

In its report, Moody’s said, “Sustained escalation in tensions with India would likely weigh on Pakistan’s growth and hamper the government’s ongoing fiscal consolidation, setting back Pakistan’s progress in achieving macroeconomic stability.”

The agency further stated that if the standoff persists, it would harm Pakistan’s access to foreign funds and strain its foreign currency reserves. This would potentially make it more difficult for Pakistan to meet its international debt obligations.

Meanwhile, India’s economy is expected to remain unaffected since it has limited financial ties with Pakistan. However, Moody’s added that a rise in defence expenditure could slow down India’s efforts to manage its own budget.

Iran’s foreign minister, who offered to help both countries ease tensions, arrived in Pakistan for meetings with top leaders. He is expected to visit India later this week.

India has accused its neighbour of supporting Islamist separatists battling security forces in its part of the region. In response, Pakistan said on Monday it will “formally apprise” the United Nations Security Council of the situation and call upon it “to exercise its primary responsibility for the maintenance of international peace and security by taking appropriate measures”.

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