Fitch Ratings, a US-based credit rating agency, has maintained Pakistan’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘CCC,’ according to a statement released on Wednesday.

The ‘CCC’ rating indicates significant external funding risks due to elevated medium-term financing requirements, notwithstanding some stabilisation and Pakistan’s commendable performance on its current standby arrangement (SBA) with the International Monetary Fund (IMF), as explained by Fitch.

While anticipating scheduled elections in February and prompt negotiation for a subsequent IMF programme after the SBA concludes in March 2024, Fitch cautioned about potential delays and uncertainties regarding Pakistan’s ability to achieve this.

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Fitch emphasised the potential vulnerability of recent reforms and the prospect of renewed political volatility in the wake of the upcoming elections. Regarding the ongoing IMF programme, Fitch expressed confidence in the unproblematic approval of the recent staff-level agreement (SLA) by the IMF board.

Fitch’s assessment highlighted the positive outcomes of the programme review, including sustained fiscal consolidation, energy price reforms despite public backlash, and strides towards adopting a more market-driven exchange rate regime.

However, Fitch also pointed out risks associated with policy implementation, citing a historical pattern of parties across the political spectrum in Pakistan failing to implement or reversing reforms agreed upon with the IMF.