Moody’s says about increased tension, India can absorb heat, the Pakistani economy cannot deal with it

With the deterioration of diplomatic relations between India and Pakistan quickly after the terrorist attack on April 22nd in Paalgam, the MOOSY’s Classification has warned that any continuous escalation of tensions may severely undermine the already fragile Pakistani economic stability.

The report, which was martyred amid the increasing geopolitical positions, stated that the long confrontation with India will burden Pakistan’s growth and endangered financial unification goals. Moody’s has warned that more views can weaken access to external financing and put additional pressure on Pakistan’s foreign exchange reserves-which slightly more than $ 15 billion, are still much lower than what is required to meet external debt obligations in the coming years.

On the other hand, India reserves are strong, exceeding $ 688 billion. Moody’s pointed out that the total economic conditions in India are still stable due to strong public investment and flexible consumption, despite the possibility of a higher defense spending slowing its financial unification.

While India has suspended the Treaty of Andoswater and Pakistan, which they criticized by stopping bilateral trade, air access, and withdrawing from the Simala Convention in 1972, analysts stress that India’s economic exposure to Pakistan is almost little – less than 0.5 % of India’s economic exports in India.

For Pakistan, the situation is much more dangerous. After swinging the edge of the failure to pay sovereignty in 2023, Pakistan has obtained a rescue and support plan of $ 3 billion in allies such as China, Saudi Arabia and the United Arab Emirates. The country still depends on continuous financial support. Last month, the International Monetary Fund reached an employee level agreement to obtain a $ 1.3 billion loan for climate flexibility and pay a billion dollars under a $ 7 billion rescue plan.

Despite the modest improvements in inflation and growth, the Pakistani economy is still weak, as approximately 50 % of government revenue for interest payments and public debt has been allocated by 70 % of GDP.

Military conflict, even if it is content, will be disastrous. As the Pakistani economy drops forward under the International Monetary Fund and loan transfers, another external shock – especially those that caused hostile work with India – can retreat from the fragile gains made in the past 18 months and sink the country again to the edge of the abyss.