ISLAMABAD: Moody’s Ratings (Moody’s) upgraded the Pakistan’s local and foreign currency issuer and senior unsecured debt ratings to Caa1 from Caa2 and changed the outlook for Pakistan to stable from positive.
“We have also upgraded the rating for the senior unsecured MTN programme to (P)Caa1 from (P)Caa2. Concurrently, we changed the outlook for the Government of Pakistan to stable from positive,” the agency said.
The upgrade to Caa1 reflects Pakistan’s improving external position, supported by its progress in reform implementation under the IMF Extended Fund Facility (EFF) program. Foreign exchange reserves are likely to continue to improve, although Pakistan will remain dependent on timely financing from official partners.
Meanwhile, the sovereign’s fiscal position is also strengthening from very weak levels, supported by an expanding tax base. Its debt affordability has improved, but remains one of the weakest among rated sovereigns. The Caa1 rating also incorporates the country’s weak governance and high political uncertainty.
The stable outlook reflects balanced risks to Pakistan’s credit profile. On the upside, improvements in the debt service burden and external profile could be more rapid than we currently expect. On the downside, there remains risks of delays in reform implementation required to secure timely official financing, which would in turn weaken Pakistan’s external position again.
