S&P Global Ratings affirmed its ‘CCC+’ long-term sovereign credit rating and ‘C’ short-term rating on Pakistan. The outlook on the long-term rating is stable.
The IMF deal is expected to bring improvement in foreign exchange reserves, which will help Pakistan to meet its debt obligations. However, Pakistan is still dependent on rollovers to maintain its foreign debt.
Despite the stability, Pakistan will remain under economic pressure due to debt repayments. Inflation, monetary policy, and uncertain situations may also affect the economy.
However, the increase in foreign exchange reserves has reduced the risk of default. To maintain economic stability, controlling foreign funds and current account deficits is essential.
Fitch upgrades Pakistan rating to CCC+
Funds from the IMF, Saudi Arabia, UAE, and China must be rolled over in time to support Pakistan’s economic stability, the report said.
On July 29, in a positive development, Fitch Ratings upgraded Pakistan’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CCC+’ from ‘CCC’.
“The upgrade reflects greater certainty over the continued availability of external funding, in the context of Pakistan’s staff-level agreement (SLA) with the IMF on a new 37-month USD7 billion Extended Fund Facility (EFF),” Fitch company said in a statement on Monday.
“Nevertheless, Pakistan’s large funding needs leave it vulnerable if it fails to implement challenging reforms, which could undermine program performance and funding,” it warned.
“We believe this will be achievable, given the strong record of support and significant policy measures in the recent budget for the fiscal year ending June 2025 (FY25),” it said.
In the previous IMF program, Fitch said that Pakistan completed its nine-month Stand-by Arrangement with the global lender in April.
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