In a positive development, Moody’s Investors Service has upgraded Pakistan’s long-term issuer rating from “Caa3” to “Caa2” with a stable outlook. This upgrade reflects improvements in Pakistan’s macroeconomic conditions and a moderately better government external position from previously very weak levels.
Moody’s also upgraded the rating for Pakistan’s senior unsecured Medium-Term Note (MTN) programme from (P)Caa3 to (P)Caa2. Concurrently, the outlook for the Government of Pakistan has been revised from stable to positive, indicating a reduction in the country’s default risk consistent with a Caa2 rating.
This follows Fitch Ratings’ earlier decision in July to upgrade Pakistan’s Long-Term Foreign-Currency Issuer Default Rating (IDR) from “CCC” to “CCC+”. Fitch’s upgrade was based on increased certainty of continued external funding, supported by Pakistan’s staff-level agreement with the IMF on a new 37-month USD7 billion Extended Fund Facility (EFF).
Fitch noted, however, that Pakistan’s significant funding needs could pose risks if the country fails to implement necessary reforms, which could affect the performance of the IMF programme and future funding availability. Despite these challenges, Fitch believes that Pakistan’s strong record of support and the significant policy measures in the recent fiscal budget provide a foundation for achieving these reforms.
