Islamabad (Khyber Mail): Global rating agency Moody’s has upgraded Pakistan’s local and foreign currency issuer and senior unsecured debt ratings from Caa3 to Caa2.
The upgrade reflects Pakistan’s improving macroeconomic conditions and moderately better government liquidity and external positions, moving from very weak levels. Concurrently, the outlook for Pakistan has been changed from stable to positive.
This upgrade indicates a reduced default risk for Pakistan, aligning with a Caa2 rating. There is now greater certainty regarding Pakistan’s sources of external financing, following the staff-level agreement with the IMF on July 12, 2024, for a 37-month Extended Fund Facility worth seven billion dollars.
Moody’s expects the IMF to approve the Extended Fund Facility in the coming weeks, noting that Pakistan’s foreign exchange reserves have nearly doubled since June 2023.
The positive outlook reflects a balance of risks skewed to the upside, capturing the potential for the government to further reduce its liquidity and external vulnerability risks and achieve a better fiscal position than currently expected, supported by the IMF program.
Sustained reform implementation, including revenue-raising measures, can increase the government revenue base and improve Pakistan’s debt affordability. Completing IMF reviews on time would also enable Pakistan to continually unlock financing from official partners, sufficient to meet its external debt obligations and support further rebuilding of its foreign exchange reserves.