Regarding Pakistan, S&P Global Ratings has maintained its “CCC+” long-term sovereign credit rating and “C” short-term rating. Regarding the long-term rating, the prognosis is unchanged.
Pakistan would be able to pay its debts more easily because of the IMF agreement, which is predicted to increase foreign exchange reserves. Rollovers are still necessary for Pakistan to keep up its foreign debt, nevertheless.
Pakistan’s economy will continue to be under pressure from debt obligations, even in the face of stability. The economy may also be impacted by monetary policy, inflation, and uncertain circumstances.
On the other hand, the default risk has decreased due to the growth in foreign exchange reserves. Controlling current account deficits and foreign exchange flows is crucial for preserving economic stability.
To sustain Pakistan’s economic stability, the report stated that funds from the IMF, Saudi Arabia, the United Arab Emirates, and China must be rolled over on schedule.
Positively, Fitch Ratings raised Pakistan’s Long-Term Foreign-Currency Issuer Default Rating (IDR) from “CCC” to “CCC+” on July 29.
The Fitch Company stated in a statement on Monday that “the upgrade reflects greater certainty over the continued availability of external funding, in the context of Pakistan’s staff-level agreement (SLA) with the IMF on a new 37-month USD7 billion Extended Fund Facility (EFF).”
It issued a warning, saying, “Nevertheless, Pakistan’s significant funding needs leave it vulnerable if it fails to implement tough reforms, which could undermine program performance and funding.”
Given the substantial policy changes in the most recent budget for the fiscal year ending in June 2025 (FY25) and the solid track record of support, we think this will be possible.
According to Fitch, Pakistan’s nine-month standby arrangement with the global lender was effectively concluded in April for the last IMF program.
