Global credit ratings agency Fitch on Monday upgraded Pakistan’s credit rating to CCC+ from CCC, saying the risk of external financing has reduced after the country secured a fresh bailout from the International Monetary Fund (IMF).
Pakistan’s Long-Term Foreign Currency Issuer Default Rating (IDR) was upgraded to CCC+ from CCC.
The ratings agency said the upgrade reduced the likelihood of Pakistan defaulting on its debt, although it remains below investment grade.
“The upgrade reflects increased certainty over the continued availability of external financing following the signing of a Staff-Level Agreement (SLA) between Pakistan and the IMF for a new 37-month $7 billion Extended Fund Facility (EFF),” ratings agency analyst Krisjanis Krustins said in a note.
“Positive performance under the previous, more temporary IMF arrangement will help the country reduce its fiscal deficit and rebuild its foreign exchange reserves, which is likely to lead to further improvement,” the ratings agency said.
“Pakistan and the IMF reached an SLA on July 12. We assume IMF Executive Board approval by the end of August, but before that the government needs to secure new financing guarantees from bilateral partners, primarily Saudi Arabia, the UAE and China, totalling approximately $4-5 billion over the EFF period. We believe this is achievable given the strong track record of support to date and significant policy measures in the recent budget for the fiscal year ending June 2025 (FY25),” Fitch said.
Pakistan expects to get final approval from the IMF for a new loan agreement of $7 billion by the end of August.
The new program, which is subject to approval by the fund’s board of directors, should help Pakistan “consolidate macroeconomic stability and create conditions for stronger, inclusive, and resilient growth,” according to the IMF.
Support from creditors including China, Saudi Arabia and the UAE is also helping Pakistan manage its foreign debt as its coalition government implements tough reforms such as widening the tax grid and cutting energy subsidy spending.
Fitch upgraded Pakistan’s long-term foreign currency bond issuer default rating to ‘CCC’ from ‘CCC-‘ in July last year following approval of the IMF loan, but the rating still indicates that the country’s credit risk is significant.
News of Pakistan’s rating upgrade was welcomed by Prime Minister Shehbaz Sharif, who appreciated the efforts of the country’s Finance Minister Muhammad Aurangzeb and his team.
The prime minister said Pakistan has started reaping the fruits of his government’s policies of sacrificing politics for the sake of the nation in the form of an improvement in the country’s economy.
Sharif said the upgrade was an international recognition of the Pakistan government’s sound economic policies, and stressed that the government was working hard on its economic reform programme, the results of which would soon be felt by the people.
“The reports of Fitch and other international financial institutions are important for Pakistan’s economic development. We will continue to tread the path of economic development of the country with added efforts and passion,” he said.
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