Moody’s prescription

First, the list of problems: Pakistan’s fast depleting foreign exchange reserves, a direct consequence of an ever-swelling import bill. Then there is the problem of borrowing from the central bank. The Finance Ministry is adamant that it will stop its mammoth borrowing from the State Bank, but the slow speed with which it will wean itself from this easy cash source can prove to be a big problem. The pressure it is putting on the rupee is already causing more inflation than can be justified by the global food and fuel crisis.

These and many of the other economic problems require structural adjustments and reductions of mismatches between aggregate demand and supply. These adjustments would require foreign assistance and investment. That, in a vicious cycle, would be difficult to achieve with low credit ratings in the first place. But there is a way out here, says Moody’s: restore the judges. The move would definitely put an end to political polarization and the tumult the ruling coalition has been seeing of late. This would, in turn, put an end to the uncertainty that markets don’t much like. Difference on how to go about restoring the judges seems to be the only major rift between the two major coalition partners. Once this is out of the way, we can expect a far smoother working of the coalition, a state of Parliament that our polity is new to, in any case. The financial case is secondary, of course, to the basic moral argument for a prompt restoration.