Pakistan economy gets a blow in Moody’s international rankings
LAHORE: Moody’s Investors Service on Wednesday changed the outlook on Pakistan’s rating to B3 negative from B3 stable. In a statement issued on Wednesday, Moody’s said that the decision to change the outlook to negative is driven by heightened external vulnerability risk.
Moody’s noted that Pakistan’s foreign exchange reserves have fallen to record lows and the absence of significant capital inflows suggest that they would not be replenished over the next 12-18 months. “Low reserve adequacy threatens continued access to external financing at moderate costs, in turn potentially raising government liquidity risks,” it added.
Nevertheless, the international rating agency noted that the decision to affirm the B3 rating reflects Pakistan’s robust growth potential which is supported by ongoing improvements in energy supply and physical infrastructure, which are likely to raise economic competitiveness over time. These credit strengths balance Pakistan’s fragile external payments position and very weak government debt affordability owing to low revenue generation capacity.
Concurrently, Moody’s has affirmed the B3 foreign currency senior unsecured ratings for The Second Pakistan Int’l Sukuk Co. Ltd. and The Third Pakistan International Sukuk Co Ltd. “The associated payment obligations are, in our view, direct obligations of the government of Pakistan,” Moody’s added.