ISLAMABAD – The global credit rating agency Moody’s has upgraded Pakistan’s credit rating to Caa2 from Caa3.
A report issued on Moody’s website showed it has raised Pakistan’s local and foreign currency debt ratings from Caa3 to Caa2 for both issuer and senior unsecured ratings.
Moody’s has also changed Pakistan’s outlook from stable to positive.
There is now greater certainty on Pakistan’s sources of external financing, following the staff-level agreement with the International Monetary Fund (IMF) for a 37-month Extended Fund Facility of $7 billion.
Moody’s expected the global lender will approve the bailout package in the next few weeks, noting that Pakistan’s foreign exchange reserves have about doubled since June 2023.
The rating agency highlighted that the positive outlook reflected a balance of risks skewed to the upside. It captures the possibility that the government is able to further lower its government liquidity and external vulnerability risks, and achieve a better fiscal position than we currently expect, supported by the IMF programme, state broadcaster reported.
Besides, sustained reform implementation, including revenue-raising measures, can increase the government revenue base and improve Pakistan’s debt affordability.
A record of completing IMF reviews on a timely manner would also allow Pakistan to continually unlock financing from official partners, sufficient to meet its external debt obligations and support further rebuilding of its foreign exchange reserves.
