Moody’s, an international rating agency, released a study on Pakistan’s economy, stating that while the country’s outlook is steady, its long-term CAA-3 rating remains ‘intact’.
According to the research, Pakistan has very high financial needs, yet its foreign exchange reserves are ‘insufficient’.
“Pakistan’s economy faces significant financial risks in the short to medium term. Moody’s also noted that the closely contested general election on February 8 carries significant political risks.
Moody’s Ratings is also concerned about the new government’s quick negotiations with the IMF for a fresh loan program. “There is concern that the coalition government’s election mandate will be insufficient to carry out the onerous measures. It will be challenging to obtain loans from other countries and organizations until the IMF’s new loan program,” Moody’s said in a report issued on Wednesday.
“Pakistan’s rating may improve as financial and external threats fall. According to Moody’s, Pakistan must enhance its foreign exchange reserves and revenue.
Moody’s has stated that Pakistan’s rating may be reduced in the event of a debt default.
Moody’s Investors Service has maintained Pakistan’s long-term issuer rating at ‘Caa3’, indicating that the country is facing high credit risk as concerns grow about the new government’s ability to quickly negotiate a new International Monetary Fund (IMF) loan programme after the current one expires in April 2024.
“The global rating agency maintained a ‘stable outlook’ on the credit rating,” Moody’s said in a statement.
Moody’s noted that it remains very doubtful if the newly elected government of Pakistan will be able “to quickly negotiate a new IMF programme soon after the current programme expires in April.”
The agency has cast doubt over the new government’s ability in the wake of the likely formation of a weak government at the centre in the coming days. February 8’s inconclusive election results suggest a hung parliament is in the making in the country.
Moody’s found the elections “highly controversial.”
“While Pakistan is likely to meet its external debt obligations for the fiscal year ending June 2024, there is limited visibility regarding the sovereign’s sources of financing to meet its very high external financing needs after the current IMF Stand-By Arrangement ends in April 2024.
