Fitch ratings

Tits budget.

believe.

he country’s external account and fiscal balance may be

improving according to the government, but for reasons

larger than this its credit rating has been left unchanged

at B negative, near junk levels. The announcement came amid no

fanfare from Fitch Ratings, one of the world’s leading credit rating

agencies, which cited high inflation, rising fiscal deficit and slow

growth among the reasons for its decision.

If the economic situation is indeed improving as the government

enjoys telling us at every opportunity, why are the rating agencies

unable to see this or acknowledge it in their ratings? The answer is

simple. Whatever improvement we see is not only shallow but also

built on unsustainable foundations.

Taxes have been squeezed out of an already exhausted and

heavily burdened population by raising the price and sales tax on

fuel and power, while the external sector deficit has been narrowed

by choking the economy to the point where growth forecasts are

now just above 2pc though the government has programmed 4pc in

The unchanged ratings are the latest evidence that the real

work of rectifying the imbalances has not even started. Most of the

measures required to put all this on a sustainable footing have not

yet begun to be implemented.

At some point, the macroeconomic adjustment under way to

bridge the deficits will need to end and the policy framework move

towards promoting growth.

If the right reforms have not been

implemented, the buffers that are being built on the fiscal and exter

nal side through this painful period will dissipate very quickly.

We know this because every other government has left behind

the same story. This time it must be different, first because we owe

it to ourselves to break this cycle once and for all, and second,

because this government came to power on the promise of change.

The unchanged rating tells us that the successes they are tout

ing at the moment may not be as deep as they would like us to