Editor
Moody’s Ratings has upgraded Pakistan’s native and international foreign money issuer and senior unsecured debt rankings from CAA3 to CAA2, whereas altering the nation’s outlook from secure to optimistic.
This determination displays the nation’s bettering macroeconomic circumstances and reasonably higher authorities liquidity and exterior positions, regardless of remaining challenges.
The improve to CAA2 signifies a discount in Pakistan’s default threat, aligning it with the brand new score degree.
This enchancment is partly attributed to the current staff-level settlement with the International Monetary Fund (IMF) on a 37-month Extended Fund Facility (EFF) value $7 billion, agreed on 12 July 2024.
The IMF Board is predicted to approve the EFF within the coming weeks, offering additional stability to Pakistan’s exterior financing sources.
Pakistan’s international alternate reserves have roughly doubled since June 2023, though they nonetheless fall wanting absolutely assembly the nation’s exterior financing wants.
The nation continues to depend on well timed financing from official companions to deal with its exterior debt obligations.
Despite the improve, Pakistan’s CAA2 score continues to mirror very weak debt affordability, with curiosity funds anticipated to devour about half of presidency income over the subsequent two to a few years.
The score additionally incorporates considerations about weak governance and excessive political uncertainty.
The optimistic outlook means that dangers at the moment are skewed to the upside.
It considers the potential for additional reductions in authorities liquidity and exterior vulnerability dangers, supported by the IMF programme.
Sustained reforms, notably revenue-raising measures, may enhance Pakistan’s debt affordability and financial place.
The score improve to CAA2 additionally applies to the backed international foreign money senior unsecured rankings for The Pakistan Global Sukuk Programme Co Ltd, with the outlook equally set to optimistic.
Moody’s has additionally raised Pakistan’s native and international foreign money nation ceilings to B3 and CAA2, respectively.
The two-notch hole between the native foreign money ceiling and the sovereign score is pushed by the federal government’s important position within the economic system, weak establishments, and excessive political and exterior vulnerability threat.
Additionally, the hole between the international foreign money ceiling and the native foreign money ceiling accounts for incomplete capital account convertibility and comparatively weak coverage effectiveness.
