LAHORE: Moody’s Investors Service on Wednesday changed the outlook onPakistan’s rating to B3 negative from B3 stable. In a statement issued onWednesday, Moody’s said that the decision to change the outlook to negativeis driven by heightened external vulnerability risk.
Moody’s noted that Pakistan’s foreign exchange reserves have fallen torecord lows and the absence of significant capital inflows suggest thatthey would not be replenished over the next 12-18 months. “Low reserveadequacy threatens continued access to external financing at moderatecosts, in turn potentially raising government liquidity risks,” it added.
Nevertheless, the international rating agency noted that the decision toaffirm the B3 rating reflects Pakistan’s robust growth potential which issupported by ongoing improvements in energy supply and physicalinfrastructure, which are likely to raise economic competitiveness overtime. These credit strengths balance Pakistan’s fragile external paymentsposition and very weak government debt affordability owing to low revenuegeneration capacity.
Concurrently, Moody’s has affirmed the B3 foreign currency senior unsecuredratings for The Second Pakistan Int’l Sukuk Co. Ltd. and The Third PakistanInternational Sukuk Co Ltd. “The associated payment obligations are, in ourview, direct obligations of the government of Pakistan,” Moody’s added.