Moody’s upgrades Pakistan outlook to stable B3

The Ministry of Finance on Saturday said that Moody’s rating agency has upgraded Pakistan’s outlook from ‘under review for downgrade’ to ‘stable’, while maintaining a B3 rating, reported 24NewsHD TV channel.

The ministry believed that this was an affirmation of the government’s sound fiscal and financial policies in times of unprecedented hardship and uncertainty.

Moody’s has upgraded Pakistan’s outlook from ‘under review for downgrade’ to ‘stable’, while maintaining a B3 rating. This is an affirmation of the Government’s sound fiscal and financial policies in these times of unprecedented hardship and uncertainty.@pid_gov

— Ministry of Finance, Government of Pakistan (@Financegovpk) August 8, 2020

Federal Minister for Industries and Production Hammad Azhar also said, “Moody’s confirmation of Pakistan's B3 rating with a stable outlook during the pandemic is encouraging sign.”

In a tweet, the minister said Pakistan’s rating was downgraded to B3 negative in June 2018 based on data or policies of Pakistan Muslim League-Nawaz term however in December 2019, after economic stabilisation by Pakistan Tehreek-e-Insaf government, the rating was upgraded to B3 stable.

Moody's confirmation of Pak's B3 rating with stable outlook during pandemic is encouraging sign.
Pak's rating was downgraded to B3 negative in June 2018 based on data/policies of pmln's term. In Dec 2019, after econ stabilsation by PTI govt, rating was upgraded to B3 Stable.

— Hammad Azhar (@Hammad_Azhar) August 8, 2020

Moody’s in a press statement said the coronavirus pandemic is weighing on economic activity in Pakistan, resulting in lower tax revenue, a wider fiscal deficit, and a higher debt burden for the government. While the continued spread of the virus poses downside risks to the economy and government finances, financial and technical support from development partners mitigates external vulnerability and liquidity risks

Moody’s Saud upward pressure on Pakistan's rating would develop if ongoing fiscal reforms were to expand the government's revenue base, raise debt affordability, and lower its debt burden beyond Moody's current expectations. 

Further reduction in external vulnerability risks, including through higher levels of foreign exchange reserve adequacy and/or increased economic competitiveness that were to lift export prospects, would also put upward pressure on the rating, adding that, “The government's commitment to its current IMF Extended Fund Facility continues to unlock a large financial envelope that Moody's expects will cover its external financing needs over the next 12-18 months, and provides an anchor for ongoing fiscal reforms.”

Moody's also expected Pakistan's economic growth to be positive in fiscal 2021 (ending June 2021) from a recession in fiscal 2020, but still low at around 1-2%.