KARACHI: The Pakistani rupee on Tuesday further appreciated against the U.S. dollar in the interbank market by two paisa, and hit Rs155.25. Yesterday, the local currency recovered by 20 paisa against the greenback.
Importantly, Moody’s Investors Service (“Moody’s”) has affirmed Pakistan’s local and foreign currency long-term issuer and senior unsecured debt ratings at B3 and changed the outlook to stable from negative.
According to a report issued by the bond credit rating business of Moody’s Corporation, “the change in outlook to stable is driven by Moody’s expectations that the balance of payments dynamics will continue to improve, supported by policy adjustments and currency flexibility.”
It further stated, “Such developments reduce external vulnerability risks, although foreign exchange reserve buffers remain low and will take time to rebuild. Moreover, while fiscal strength has weakened with higher debt levels largely as a result of currency depreciation, ongoing fiscal reforms, including through the country’s International Monetary Fund (IMF) programme, will mitigate risks related to debt sustainability and government liquidity.”
“The rating affirmation reflects Pakistan’s relatively large economy and robust long-term growth potential, coupled with ongoing institutional enhancements that raise policy credibility and effectiveness, albeit from a low starting point.”
“These credit strengths are balanced against structural constraints to economic and export competitiveness, the government’s low revenue generation capacity that weakens debt affordability, fiscal strength that will remain weak over the foreseeable future, as well as political and still-material external vulnerability risks,” it added.
