Moody’s upgrades Pak dollar bond rating from stable to positive

KARACHI: The Moody’s Investors Service on Wednesday upgraded the outlook on Pakistan’s foreign currency government bond (dollar bond) rating to positive from stable, as the country’s macroeconomic indicators showed an improvement.
“Concurrently, Moody’s has affirmed the government’s issuer rating and senior unsecured rating at Caa1. The Caa1 rating is also affirmed for US dollar Trust Certificates issued by The Second Pakistan International Sukuk Company Limited,” the rating agency said.
Moody’s said although Pakistan’s international liquidity buffer has been replenished and balance of payments pressures had subsided, an incipient recovery in investor confidence has not yet significantly boosted direct investment inflows.
“In addition, most of the build-up in official reserves has come from external borrowings … Pakistan’s economic recovery faces structural challenges, and reform measures have not completely taken hold,” it added.
“While a positive outlook suggests a diminution of the probability of default, the Caa1 rating reflects Pakistan’s structurally large fiscal imbalances, high debt servicing costs, dependence on foreign creditors and substantial refinancing needs.”
Moody’s decision to revise the outlook on Pakistan’s foreign currency rating is based on strengthening of external liquidity position, continued efforts towards fiscal consolidation, and the government’s steady progress in achieving structural reforms under the International Monetary Fund (IMF) programme.
Pakistan has been broadly on track to achieve reforms prescribed under its Extended Fund Facility (EFF) with the IMF, successfully completing five reviews.
Last month, the IMF and the Pakistani authorities reached staff-level understandings on a memorandum of economic and financial policies on the sixth review of the programme which, upon approval by the IMF’s board management, will be discussed by the mission’s executive board. Upon completion of the review, a new tranche of $518 million would be made available to Pakistan.