Home/ News / Pakistan's credit rating lowered to Caa3 by Moody's; outlook stabilises from negative

Moody's downgrades the Government of Pakistan's local and foreign currency issuer and senior unsecured debt ratings to Caa3 from Caa1, as well as the senior unsecured MTN program rating to (P)Caa3 from (P)Caa1. The outlook has been revised from negative to stable.

Moody's has downgraded the ratings to Caa3 due to their evaluation that Pakistan's liquidity and external position have become increasingly vulnerable, posing a high risk of default, which is consistent with the Caa3 rating.

Pakistan's foreign exchange reserves have dropped to levels that are insufficient to cover its immediate and medium-term import needs and external debt obligations, which has led to a downgrade of its ratings.

While the government is taking steps to fulfill the IMF program's requirements and IMF disbursements may provide temporary relief, Pakistan faces governance issues and increased social risks that could limit its ability to consistently implement the policies required to secure significant financing and effectively reduce risks to the balance of payments.

In a statement, the Moody's said, “The stable outlook reflects Moody's assessment that the pressures that Pakistan faces are consistent with a Caa3 rating level, with broadly balanced risks." 

“Significant external financing becoming available in the very near term, such as through the disbursement of the next tranches under the current IMF programme and related financing, would reduce default risk potentially to a level consistent with a higher rating," it said.

The Moody's further said, “The downgrade to Caa3 from Caa1 rating also applies to the backed foreign currency senior unsecured ratings for The Pakistan Global Sukuk Programme Co Ltd. The associated payment obligations are, in Moody's view, direct obligations of the Government of Pakistan."

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Updated: 01 Mar 2023, 10:22 PM IST
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