A big setback for Pakistan on the economic front
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Hong Kong - Fitch Ratings has revised Pakistan's outlook to negative from stable, while affirming its Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) at 'B-'.
The Revision of the Outlook to Negative reflects significant deterioration in Pakistan's external liquidity position and financing conditions since early 2022, the rating agency said in a statement.
The developments comes as an outcome of the by-elections in Punjab triggered political instability in the country that caused free fall of Pakistani currency in interbank market and downward trend in Pakistan Stock Exchange.
“We assume IMF board approval of Pakistan's new staff-level agreement with the IMF, but see considerable risks to its implementation and to continued access to financing after the programme's expiry in June 2023 in a tough economic and political climate,” Fitch said in its statement.
It said that renewed political volatility cannot be excluded and could undermine the authorities' fiscal and external adjustment, as happened in early 2022 and 2018, particularly in the current environment of slowing growth and high inflation.
Former Prime Minister Imran Khan, who was ousted in a no-confidence vote on 10 April, has called on the government to hold early elections and has been organising large-scale protests in cities around the country. The new government is supported by a disparate coalition of parties with only a slim majority in parliament. Regular elections are due in October 2023, creating the risk of policy slippage after the conclusion of the IMF programme.