Political turmoil in Pakistan generates serious doubts about policy continuity: Moody's.

ISLAMABAD: Pakistan's "substantial uncertainty regarding policy continuity" and declining foreign exchange reserves have been underlined by Moodys Investors Service, said a report.

The New York-based credit rating agency, on the other hand, predicted a stable outlook for Pakistani banks and predicted that the country's GDP growth rate will remain between 3 and 4%.

"The political upheaval reflects the volatility that besets Pakistan's political environment and raises significant uncertainty over policy continuity, at a time when Pakistan is encumbered with surging inflation, widening current account deficits, and declining foreign-exchange reserves," Moody's said of Imran Khan's ouster by a no-confidence vote and the subsequent confirmation of Shehbaz Sharif as the new Prime Minister until August 2023."

According to Dawn, Moody's said it's unclear how the new government will approach the International Monetary Fund's (IMF) programme during the interim period before the next elections, prolonging the uncertainty over whether Pakistan will be able to secure IMF financing to boost its foreign-exchange reserves, which have fallen to a level that only covers about two months of imports.

Meanwhile, it stated that the banking sector's stable perspective is supported by an increasing economy and healthy finances, and thus maintained a steady outlook (B3 stable).

Moody's forecasts real GDP growth of between 3% and 4% for the current fiscal year and between 4% and 5% for the fiscal year 2023, with credit growth exceeding 12%.

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