Moody’s Indicates Potential Upgrade for Pakistan’s Rating Amid Positive Economic Indicators.
Pakistan’s Rating Upgraded with Improved External & Liquidity Risks: Moody’s. In a notable development for Pakistan’s economic landscape, Moody’s Investors Service has hinted at the possibility of an upgrade for the country’s rating, signaling positive prospects amidst evolving economic indicators. Despite ongoing challenges, Moody’s assessment reflects a cautiously optimistic outlook for Pakistan’s credit profile, highlighting several key factors that could contribute to a potential upgrade in the future.
The recent assessment by Moody’s comes against the backdrop of significant developments in Pakistan’s financial sector, including heightened investor confidence and improved political stability following the recent elections. According to Bloomberg, the Bank of America has raised its recommendation for Pakistan dollar bonds, citing a decline in political uncertainty post-elections and potential rating improvements.
While Moody’s underscores the persistent risks associated with Pakistan’s fiscal landscape, including high debt levels and political uncertainties, it acknowledges the government’s efforts to address economic challenges and pursue reforms. Notably, Pakistan’s recent engagement with the International Monetary Fund (IMF) and other multilateral partners has unlocked financing opportunities, leading to a modest accumulation of foreign exchange reserves.
Furthermore, Moody’s emphasizes the importance of continued IMF engagement beyond the current program, which could support additional financing from other bilateral and multilateral partners, thereby reducing default risks. The stable outlook reflects Moody’s assessment that the pressures faced by Pakistan are consistent with its current rating level, with balanced risks.
Looking ahead, Moody’s outlines potential criteria for an upgrade in Pakistan’s rating, including a sustained increase in foreign exchange reserves and a resumption of fiscal consolidation through revenue-raising measures. Additionally, a decrease in government liquidity and external vulnerability risks would be instrumental in driving a positive rating revision.
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However, Moody’s also highlights the risks associated with potential delays in funding from the IMF and other partners, particularly after the expiry of the existing Standby Arrangement program in April 2024. Addressing these challenges and maintaining economic stability will be crucial for Pakistan to realize its full growth potential and enhance its credit profile.
Overall, Moody’s assessment provides a nuanced perspective on Pakistan’s economic trajectory, recognizing both the progress made and the ongoing challenges that lie ahead. With concerted efforts and prudent economic management, Pakistan stands poised to navigate these challenges and emerge stronger, potentially paving the way for a positive rating upgrade in the future.
