Moody’s Lifts Pakistan’s Credit Rating: A Glimpse of Financial Optimism
Exciting news from Moody’s! The global credit rating agency has just elevated Pakistan’s local and foreign currency issuer ratings from Caa3 to Caa2. In addition, the rating for Pakistan’s senior unsecured Medium-Term Note (MTN) programme has also been upgraded from (P)Caa3 to (P)Caa2. Alongside this, the outlook for Pakistan has shifted from stable to positive, signaling a significant reduction in the country’s default risk to a level aligned with the new Caa2 rating.
Moody’s, which had downgraded Pakistan’s ratings earlier this year in February, now highlights increased confidence in the country’s financial future. This optimism stems from Pakistan’s recent staff-level agreement with the International Monetary Fund (IMF) on a 37-month Extended Fund Facility (EFF) worth $7 billion, finalized on July 12, 2024. The IMF Board is expected to approve this EFF shortly.
While Pakistan’s foreign exchange reserves have approximately doubled since June 2023, they still fall short of what is necessary to fully cover its external financing needs. Nonetheless, the improved rating reflects a more promising outlook for Pakistan’s economic stability and financing prospects.
