Fitch Ratings upgraded Pakistan’s credit rating, saying the country’s risk from external financing has decreased after it secured a new bailout from the International Monetary Fund.
The firm raised Pakistan’s rating to CCC+ from CCC, suggesting that while the country remains below investment grade, the likelihood of default has decreased.
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“The upgrade reflects increased certainty over the continued availability of external financing,” Krisgiannis Krastins, an analyst at the ratings agency, wrote in a note. The previous IMF bailout “helped the country reduce its budget deficit and rebuild its foreign exchange reserves, with further improvement expected.”
Pakistan hopes to get final approval for a new $7 billion loan agreement from the IMF by the end of August. Support from creditors such as China, Saudi Arabia and the UAE is also helping the country manage its external debt as the coalition government implements tough reforms such as widening the tax grid and cutting energy subsidy spending.
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External public debt repayments this fiscal year are $22 billion, of which about $13 billion are bilateral loans that are typically rolled over, the report said.The central bank is also gradually rebuilding reserves, supported by a limited current account deficit and investment inflows, according to Fitch.
Dollar-denominated notes rose, with notes due in 2026, 2031 and 2029 all adding at least half a cent. The 2031 note rose to 79.7 cents on the dollar, according to benchmark prices compiled by Bloomberg.
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