Moody’s Investor Service on Thursday downgraded Pakistan’s outlook from stable to negative, citing “heightened external vulnerability” and uncertainty around securing external financing to meet the country’s needs.
“The decision to change the outlook to negative is driven by Pakistan’s heightened external vulnerability risk and uncertainty around the sovereign’s ability to secure additional external financing to meet its needs. Moody’s assesses that Pakistan’s external vulnerability risk has been amplified by rising inflation, which puts downward pressure on the current account, the currency and already thin foreign exchange reserves, especially in the context of heightened political and social risk,” the statement said. It added that the country’s “weak institutions and governance strength” had added uncertainty around the future direction of macroeconomic policy, including whether Pakistan would complete the International Monetary Fund’s (IMF) Extended Fund Facility (EFF) programme and maintain a credible policy path that supports further financing.
