ISLAMABAD, JULY 31: Pakistan’s “C” short-term rating and “CCC+” long-term sovereign credit rating have been confirmed by Standard & Poor (S&P Global Ratings). The long-term rating has a steady outlook.
The rating agency stated, “Our transfer & convertibility assessment remains at ‘CCC+.”
It went on to say that the steady outlook weighs the risks to Pakistan’s fiscal performance and external financial situation over the next 12 months against the likelihood of ongoing support from bilateral and multilateral partners.
If Pakistan’s external indicators suddenly worsen or if fiscal deficits increase to a point where they surpass the financing capability of the country’s banking system, to the point where the government’s desire or ability to service its commercial debt is compromised, we may have to downgrade our ratings. Further growth in the government’s interest expense, which we predict will surpass 45% of government revenues over the next several years, might be one sign of domestic funding stress, the report continued.
On the other hand, S&P declared that if Pakistan’s fiscal and external standing significantly improve from their current state, it will upgrade its ratings. According to S&P Global, indicators of progress can include a steady increase in foreign currency reserves, a decline in Pakistan’s debt-service expenses as a percentage of GDP, and an extension of debt maturities.
Over the past 12 months, Pakistan has strengthened its foreign reserves, lowering the chance of a short-term default. For the long run, nevertheless, the nation will need positive financial and macroeconomic advances in order to fulfill its responsibilities.
