Fitch elevates Pakistan's rating on the heels of lifeline agreement with IMF
Business
Fitch elevates Pakistan’s rating to ‘CCC’ from ‘CCC-’
ISLAMABAD (Web Desk) - Following the staff-level agreement with the International Monetary Fund (IMF) on a nine-month Stand-by Arrangement (SBA) in June, global rating agency Fitch on Monday elevated Pakistan’s long-term foreign currency issuer default rating (IDR) to ‘CCC’ from ‘CCC-’, citing improved external liquidity and funding conditions.
Pakistan was able to secure the much-needed $3bn short-term financial deal from the IMF earlier this month, saving from the likely default.
Commenting on the development, Finance Minister Ishaq Dar said that Fitch upgraded Pakistan’s Long Term Foreign Currency rating to CCC from IDR (Issuer Default Rating).
Taking to Twitter, Dar wrote, “Another positive news towards current economic revival journey, AlhamdoLilah.”
Global Rating Agency “Fitch”
— Ishaq Dar (@MIshaqDar50) July 10, 2023
Upgrades Pakistan’s Long Term Foreign-Currency rating to CCC from IDR(Issuer Default Rating).
Another positive news towards current economic revival journey, AlhamdoLilah.
Congratulations to PM @CMShehbaz ,the Nation, Govt Allies & Economic Team
In a statement issued today, Fitch said it expected the SLA to be approved by the IMF board in July, catalysing other funding and anchoring policies around parliamentary elections due by October.
However, it said, “The programme’s implementation and external funding risks remain due to a volatile political climate and large external financing requirement.
Talking about IMF-driven reforms taken by the government, the agency said Pakistan had recently taken measures to fix shortfalls in its revenue collection, energy subsidies and policy inconsistency with a market-determined exchange rate, including import financing restrictions.
“These issues had held up the last three reviews of Pakistan’s previous IMF programme, before its expiry in June,” the agency maintained.
“Most recently, the government amended its proposed budget for the fiscal year ending June 2024 (FY24) to introduce new revenue measures and cut spending, following additional tax measures and subsidy reforms in February.
The authorities appeared to abandon exchange-rate management in January 2023, although guidelines on prioritising imports were only removed in June.”
The New York-based agency — one of the three major global rating agencies — said IMF’s board approval would release an immediate disbursement of $1.2 billion, with the remaining $1.8 billion scheduled after reviews in November and February 2024.
On Pakistan’s overall funding target ambitions, the agency said authorities expected $25 billion in gross new external financing in FY24 against $15 billion in public debt maturities, including $1 billion in bonds and $3.6 billion to multilateral creditors.
Fitch further added: Pakistan’s current account deficit (CAD) had narrowed as the earlier restrictions on imports and the availability of foreign exchange, tighter fiscal and economic policies, measures to limit energy consumption and lower commodity prices.
