NEW YORK: Moody’s Investors Service (“Moody’s”) on Tuesday affirmed the Government of Pakistan’s B3 issuer and senior unsecured ratings, and maintained a stable outlook.
The decision to affirm the rating ‘balances credit-supportive and -constraining factors,’ the report said.
The investors’ service firm stated that the country’s medium-term growth outlook is ‘strong, supported by the China-Pakistan Economic Corridor (CPEC) project to address critical infrastructure constraints, and the continuing effects of macrostability-enhancing reforms started under the International Monetary Fund (IMF)’s Extended Fund Facility (EFF) program in 2013-16.’
The research report, however, pointed out that the government’s borrowing burden remained high and fiscal deficits were relatively wide, primarily driven by a ‘narrow revenue base that restricts development spending.’
Pakistan’s foreign exchange reserve adequacy was reported stronger as compared to the past few years; however, the firm said it was still vulnerable to an increase in imports.
Domestic politics and geopolitical risk were cited as two significant factors that continue to represent a significant constraint on the country’s rating.
According to the rating report, the decision to maintain a stable outlook on Pakistan’s B3 rating reflects ‘broadly balanced risks related to these two sets of factors.’
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.
Pakistan’s Ba3 local currency bond and deposit ceilings remain unchanged. The B2 foreign currency bond ceiling and the Caa1 foreign currency deposit ceiling are also unchanged. These ceilings act as a cap on the ratings that can be assigned to the obligations of other entities domiciled in the country.