Fitch Ratings revises up Pakistan’s rating to CCC+
Date
7/30/2024 5:43:30 AM
(MENAFN) On Monday, Fitch Ratings announced an upgrade of Pakistan's long-term foreign currency issuer default rating from CCC to CCC+. This positive adjustment reflects the country's improved stability regarding the availability of external funding. The upgrade acknowledges Pakistan's progress under a previous, more temporary IMF arrangement, which helped narrow fiscal deficits and rebuild foreign exchange (FX) reserves, paving the way for further economic improvements.
Fitch highlighted that despite the upgrade, Pakistan's substantial funding needs pose risks if the country fails to implement necessary reforms. Such failures could jeopardize the performance of the IMF program and the continuation of funding. The agency forecasted that Pakistan's current account deficit would remain relatively stable at around USD4 billion, or 1 percent of GDP, in the 2024 fiscal year. This is an improvement from USD700 million in the 2023 fiscal year, influenced by tight financing conditions and subdued domestic demand.
The report also indicated that government debt is expected to decrease to 68 percent of GDP from 75 percent during the same period. Fitch anticipates that inflation and interest costs will decline in tandem with economic growth and primary surpluses, leading to a gradual reduction in the debt-to-GDP ratio.
However, Fitch warned that Pakistan's rating could face downward pressure if there is a deterioration in external liquidity conditions, such as delays in IMF program reviews or signs of potential debt restructuring. Conversely, the rating could be upgraded if there is a sustained recovery in foreign currency reserves, reduced external financing risks, and increased confidence in a downward trend for government debt.
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