Pakistan sustains its Moody’s ratings at B3 ‘stable’ outlook

Credit rating agency Moody’s on Saturday, retained Pakistan’s B3 rating while maintaining country’s outlook as ‘stable’.

According to Moody’s Pakistan’s growth is expected to be positive in 2021 (ending June 2021), but still low at around 1-2 per cent, whereas the country’s economy is relatively closed with low reliance on exports, movement restrictions due to coronavirus will keep economic activity below the pre-outbreak levels for some time.

“The government’s commitment to its current International Monetary Fund (IMF) Extended Fund Facility (EFF) continues to unlock a large financial envelope that Moody’s expects will cover its external financing needs over the next 12-18 months, and provides an anchor for ongoing fiscal reforms,” it said.

The agency expects that slow economic recovery will effect government revenue and fiscal deficit will be around 8-8.5 per cent of GDP till the end of fiscal year 2020-2021, meanwhile government’s debt burden is expected to be around 90 per cent of GDP in the same period.

Read More: Moody’s puts Pakistan under watch

Moody’s predicts that the current account deficit (CAD) for ongoing fiscal year (2020-2021) at 2 per cent of GDP as compared to 1.1 per cent recorded in previous fiscal year.

“Stability in the balance of payments will, in turn, allow the State Bank of Pakistan, the central bank, to keep monetary policy accommodative as inflation declines,” it noted.

Furthermore, according to the credit rating agency Pakistan needs to expand its government revenue base by further improvement in ongoing fiscal reforms to raise debt affordability along with reduction in external vulnerability risks with high level of foreign exchange reserves.

It is pertinent to know that a rating committee meeting was called on August 4 to discuss the credit rating of Pakistan with the possibility of country’s rating to be downgraded due to poor economic indicators which have been further exacerbated due to economic repercussions of COVID-19 pandemic.