ISLAMABAD: Moody’s Investors Service maintained Pakistan’s ratings at ‘Caa3’ on Tuesday, with a stable outlook.
However, it emphasized the significant challenges regarding liquidity and external vulnerability following contentious elections, which have severely limited the decision-making capacity of the awaiting coalition government.
The global rating agency completed its review of Pakistan’s ratings last week but did not announce any credit rating action. The country’s ratings, including its Caa3 long-term issuer rating with a stable outlook, remain unchanged.
The agency had previously downgraded Pakistan’s rating from Caa1 to Caa3 in February of the previous year due to challenges with the IMF program and the subsequent decline in foreign exchange reserves.
Moody’s highlighted the high political risks following the controversial general elections held on February 8, 2024. It noted uncertainty surrounding the formation of a coalition government, primarily led by PML-N and PPP, and questioned its readiness to negotiate a new IMF program after the current one expires in April.
The agency expressed concerns about Pakistan’s credit profile, citing very high liquidity and external vulnerability risks, low foreign exchange reserves, weak fiscal strength, and elevated political risks.
While acknowledging Pakistan’s large economy and moderate growth potential, Moody’s underscored the country’s exposure to extreme weather events and weak governance.
Although Pakistan is expected to meet its external debt obligations for the fiscal year ending June 2024, there are uncertainties regarding its sources of financing after the current IMF Stand-By Arrangement ends in April.
The stable outlook reflects Moody’s assessment of consistent pressures with a Caa3 rating level, with balanced risks, emphasizing the importance of continued IMF engagement to secure additional financing and reduce default risk.
