Economic rating organization FTSE Russell has maintained Pakistan on its watch list instead of downgrading it further due to political rehabilitation and a reform-friendly Prime Minister. may decline and it is threatened to fall below the emerging market border secondary market rating.
According to the rating organization, the weight of Pakistan’s economy has steadily decreased over the past few years in terms of the organization’s standards.
As a result, the Pakistani market is failing to meet the minimum capitalization required for investment (capital held in the country) and is on the verge of exiting the emerging secondary markets, after which Pakistan’s ranking has further declined. There is a fear that emerging markets may fall below the border of secondary markets.
Apart from Pakistan, the economies of Egypt and Vietnam are also on the watch list and may be reclassified.
Pakistan was added to this watch list in September 2023. According to the rating organization, the weight of Pakistan’s economy has steadily decreased over the past few years in terms of the organization’s standards.
As a result, the Pakistani market is failing to meet the minimum capitalization required for investment and is on the verge of emerging secondary markets.
The global index provider, which tracks $15.9 trillion in assets, has neither downgraded nor removed Pakistan from the watch list, keeping Pakistan on the watch list for now.
Economic rating organization FTSE Russell has kept it on its watch list because of the condition of Pakistan’s economy, after which Pakistan’s rating may further decrease and the border of emerging markets. There is still a risk of falling below the current market rating. Pakistan was added to this watch list in September 2023.
In a statement, the rating agency said, “As a result of the recommendations received from the Country Classification Advisory Committee of FTSE Equity and the FTSE Russell Policy Advisory Board, the FTSE Russell Index Governance Board has been decided that Pakistan will be retained in the watch list even in the interim update of March 2024.
Bloomberg, while reporting on this decision of FTSE, has said that this decision has come after a period of positive developments, which include the political stability of Pakistan and a reform-friendly prime minister. These measures have reduced default risk and Pakistan’s equities have underperformed contemporary emerging markets.
Despite economic challenges, FTSE Russell’s move has given a potential lifeline to Pakistan, which had seen a significant reduction in its foreign portfolio over the past seven years. And now investment in Pakistan can be restored. Pakistan’s market capitalization was $100 billion in 2017, which fell to $21 billion in 2023 due to its underweight in MCI Inc.