Istanbul
Fitch Ratings on Monday said it has upgraded Pakistan’s long-term foreign currency bond issuer default ratings to CCC+ from CCC.
The ratings agency said the upgrade reflects increased confidence in the country’s continued access to external financing.
“The favourable performance of the previous, more temporary IMF arrangement has enabled the country to reduce the fiscal deficit and restore foreign exchange reserves, and further improvement is expected,” the ministry said in a statement.
But he added that Pakistan needs significant funding and failure to implement reforms would leave it in a vulnerable position that could undermine the results and resources of the IMF program.
Fitch expects Pakistan’s current account deficit to remain relatively contained at 1% of GDP, or about $4 billion, in FY2024, after $700 million in FY2023, due to tight financing conditions and weak domestic demand.
The agency estimates that government debt will fall from 75% of GDP to 68% during this period.
“We expect economic growth and the primary budget surplus to gradually lower the government debt-to-GDP ratio, leading to a gradual decline in inflation and interest costs,” the statement said.
Fitch warned that Pakistan’s ratings could be downgraded if its external liquidity situation worsens due to delays in the IMF’s program review or signs that authorities are considering a debt restructuring.
A sustained recovery in foreign exchange reserves, easing external financing risks, and increased confidence in the declining government debt trend could lead to an upgrade of the country’s ratings.
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