KARACHI: Moody’s Investors Service (Moody’s) downgraded Pakistan’s outlook to negative from stable. It affirmed Government of Pakistan’s B3 local and foreign currency issuer and senior unsecured debt ratings.
“The decision to change the outlook to negative is driven by Pakistan’s heightened external vulnerability risk and uncertainty around the sovereign’s ability to secure additional external financing to meet its needs,” read the statement.
The ratings agency said Pakistan’s external vulnerability risk has been amplified by rising inflation, which puts downward pressure on the current account, the currency and – already thin – foreign exchange reserves, especially in the context of heightened political and social risk.
“Pakistan’s weak institutions and governance strength adds uncertainty around the future direction of macroeconomic policy, including whether the country will complete the current IMF Extended Fund Facility (EFF) programme and maintain a credible policy path that supports further financing,” it stated.
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However, Moody’s maintained a B3 rating, which reflects that despite the abovementioned risks, Pakistan will conclude the seventh review under the IMF Extended Fund Facility (EFF) programme by the second half of this calendar year. This will lead “to additional financing from other bilateral and multilateral partners”.
“In this case, Moody’s assesses that Pakistan will be able to close its financing gap for the next couple of years,” it said.