ISLAMABAD – Fitch Ratings Inc, the US-based credit rating agency, has maintained its rating for Pakistan despite local currency appreciation and other positive economic cues.
In a statement, the rating agency affirmed the country’s Long-Term Foreign-Currency Issuer Default Rating at ‘CCC’, which shows high external funding risks amid high medium-term financing requirements, despite economic development and Stand-by Arrangement (SBA) with International Monetary Fund.
It mentioned that elections are expected to take place as per schedule in February 2024 and a follow-up IMF program to be negotiated quickly after SBA finishes in March next year. Fitch however mentioned the risk of delays and uncertainty.
The recent report said delay in elections could endanger the durability of economic reforms and leave room for renewed political volatility.
It expressed optimism about IMF board approval of the recent staff-level agreement, and further mentioned that it reflects continued fiscal consolidation, energy price reforms in the face of a public backlash, and moves towards a more market-determined exchange rate regime.
Risks related to policy implementation remains as different political parties hold reputation of failing to implement or reversing reforms agreed with the global lenders, it said.
Fitch further risks that current consensus within Asian nations on measures necessary to ensure continued funding could dissipate quickly once economic and external conditions improve, although Pakistan now has fewer financing options than in the past.
The release said authorities expect total gross new external financing of $18 billion in the ongoing fiscal year, against nearly $9 billion in government debt maturities.
Fitch predicted a current account deficit (CAD) of about $2 billion in FY24, in line with last year. It further blamed fiscal policies, lower commodity prices and limited FX availability for narrowing CAD from over $17 billion in FY22.
The country’s foreign reserves recovered in recent months but are still low.
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