Islamabad, 28 August 2024 (TDI): Moody’s Ratings upgraded the Government of Pakistan’s local and foreign currency issuer and senior unsecured debt ratings to Caa2 from Caa3 on Wednesday.
The rating for the senior unsecured MTN programme to (P)Caa2 from (P)Caa3 has also been upgraded , it said in a statement.
Concurrently, the outlook for Government of Pakistan is changed to positive from stable,” it added.
The upgrade to Caa2 reflects the improving macroeconomic conditions of Pakistan and moderately better government liquidity and external positions, from very weak levels.
“Accordingly, Pakistan’s default risk has degraded to a level consistent with a Caa2 rating,” it said.
The global credit rating agency said that “there is now greater certainty on the country’s sources of external financing, after the sovereign’s staff-level agreement with the International Monetary Fund on 12 July 2024 for a 37-month Extended Fund Facility of 7 billion dollars.
We expect the IMF Board to approve the EFF in a few weeks, the agency said.
In its report, Moody’s noted that Pakistan’s foreign exchange reserves have about doubled since June last year, although they remain below what is needed to meet its external financing requirements.
Pakistan remains reliant on timely financing from official partners to fully meet its external debt obligations, the agency said.
It added that Pakistan’s Caa2 rating continues to reflect the country’s very low debt affordability, which drives high debt sustainability risk.
“We expect interest payments to continue absorbing about half of government revenue over the 2 to 3 years, the statement said.
The Caa2 rating also incorporates Pakistan’s weak governance and high political uncertainty, it said.
