Pakistan’s long-term sovereign credit rating was downgraded by S&P Global from “B” to “CCC+” to reflect the continuous deterioration of the country’s external, fiscal, and economic metrics.
According to S&P, Pakistan’s already meagre foreign exchange reserves would continue to be under pressure through 2023 without a drop in oil prices or an improvement in international aid. The nation also faces significant political risks that could alter its future course of policies.
According to the report, Pakistan’s economic and fiscal results are predicted to be negatively impacted by this year’s devastating floods, skyrocketing food and energy prices, and rising global interest rates, with refinancing issues over the medium term.
The agency maintained its outlook at “stable”.
With barely enough reserves to pay one month’s worth of imports, a dollar shortage, and a delay in its loan programme with the International Monetary Fund, Pakistan is in the midst of an economic catastrophe. Despite the payment of a $1 billion bond this month, long-term dollar bonds continue to trade at distressed prices, reflecting investors’ lack of confidence in Pakistan’s capacity to meet its international debt commitments.
Following the terrible floods that hit the country earlier this year, Moody’s lowered Pakistan’s sovereign credit rating by one notch, from B3 to Caa1, citing heightened government liquidity and external vulnerability risks.
