ISLAMABAD: Rating agency Standard & Poor’s (S&P) has downgraded Pakistan’s long-term foreign currency debt rating from B to B-.
The agency maintained a stable outlook for Pakistan’s long-term rating.
The rating agency affirmed the short-term sovereign and issue rating at B. The S&P stated that Pakistan has sufficient finances to meet its external accounts for the next twelve months. It projects neither external nor fiscal metrics will worsen beyond their current forecasts.
Additionally, S&P said it would raise their ratings for Pakistan if the economy materially outperformed their expectations i.e. strengthening the country’s fiscal and external fiscal positions.
In consequence of more subdued expectations regarding Pakistan’s economic growth, alongside intensified external and fiscal risks, the agency said, it lowered the country’s ratings.
It highlighted this was due to the ongoing deterioration in the country’s broad macroeconomic offerings.
The agency forecasted that the fiscal and external imbalances will remain elevated despite securing financial aid from bilateral partners to address its immediate external financing requirements.
Also, prolonged talks with the International Monetary Fund (IMF) hint that any resulting reforms, whether under the program or contrarily will be less advantageous than previously hoped.
The rating agency said fiscal consolidation will remain challenging as the economy slows due to a dearth of growth drivers and as the stimulus from China-Pakistan Economic Corridor (CPEC) investment fades.
According to S&P, the country will benefit over the long-term due to the improvements associated with its infrastructure, however, this will be offset by elevated fiscal and external stresses over the coming few years.