Moody’s upgrades Pakistan’s outlook to stable

KARACHI, Pakistan

Rating agency Moody’s has upgraded Pakistan’s outlook from “negative” to “stable”, a significant sign of stabilization vis-à-vis the country’s otherwise ailing economy.

The agency also maintained the country’s B3 rating.

“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,” Finance Minister Hafeez Shaikh said in a Twitter post.

Pakistan’s outlook was downgraded to “negative” in June 2018 due to the country’s depreciating foreign reserves, which posed “heightened external vulnerability risk”.

"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," said Moody's in a statement on Monday.

“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) program, will mitigate risks related to debt sustainability and government liquidity," it added.

In May this year, the IMF announced a $6 billion bailout package to cash-strapped Pakistan to prop up the latter's crumbling economy amid tough conditions, which analysts reckon will further rise inflation and utility tariffs.

Grappling with a colossal $18 billion current account deficit, Prime Minister Imran Khan's government had approached the IMF for a bailout package in August last year amid change of his financial team, which failed to contain the mounting current account and budget deficit and decreasing growth rate apart from a sharp devaluation of rupee against dollar.

The government appointed Reza Baqir -- a former IMF employee as governor of the State Bank of Pakistan -- a move viewed as "outsourcing the economy to IMF" by the opposition.

Saudi Arabia and United Arab Emirates have also recently announced $6 billion each bailout packages for Pakistan.

Islamabad’s current external debt stands at nearly $100 billion -- the bulk of it borrowed from the World Bank, IMF, Asian Development Bank, Islamic Development Bank, the United States, China, France and other countries.

The South Asian nuclear state has conceded a loss of $100 billion since 2002 after it joined the U.S.-led war against terrorism.