Moody’s upgrades Pakistan’s outlook from unstable to stable

Singapore, December 02, 2019 — Moody’s Investors Service (“Moody’s”) has today affirmed the Government of Pakistan’s local and foreign currency long-term issuer and senior unsecured debt ratings at B3 and changed the outlook to stable from negative.

The change in outlook to stable is driven by Moody’s expectations that the balance of payments dynamics will continue to improve, supported by policy adjustments and currency flexibility. Such developments reduce external vulnerability risks, although foreign exchange reserve buffers remain low and will take time to rebuild.

Moreover, while fiscal strength has weakened with higher debt levels largely as a result of currency depreciation, ongoing fiscal reforms, including through the country’s International Monetary Fund (IMF) programme, will mitigate risks related to debt sustainability and government liquidity.

Moody’s changes Pakistan’s outlook to stable from negative, affirms B3 rating

In this regard, Prime Minister Imran Khan’s finance adviser, Dr Abdul Hafeez Sheikh, said Moody’s decision to bump up the country’s outlook corroborates the incumbent government’s success in enhancing the economy.

In a tweet Dr Abdul Hafeez Shaikh said, “Moody’s upgrades Pakistan’s outlook to B3 ‘Stable’ from ‘Negative’. The upgradation of outlook to Stable is affirmation of Government’s success in stabilising the country’s economy and laying a firm foundation for robust long term growth.”

Moody’s upgrades Pakistan’s outlook to B3 ‘Stable’ from ‘Negative’. The upgradation of outlook to Stable is affirmation of Government's success in stabilising the country’s economy and laying a firm foundation for robust long term growth.

— Dr. Abdul Hafeez Shaikh (@a_hafeezshaikh) December 2, 2019

Institutional enhancements including increased central bank independence and the implementation of the new PFM Act, effective fiscal 2020, also raise monetary and fiscal policy credibility and effectiveness. Moody’s expects the government to introduce and approve a new State Bank of Pakistan (SBP) Act within fiscal 2020, which will forbid central bank financing of government debt and reinforce price stability as the central bank’s primary objective.