SINGAPORE: Moody’s Investors Service on Wednesday affirmed Pakistan’s B3 rating’s outlook was changed to negative from stable.
A report issued by Moody’s International stated that the decision to change the outlook to negative was driven by the heightened external vulnerability risk.
According to the report, Pakistan’s forex reserves had fallen to the lowest level, with absent significant capital inflows which may not be restored over the next 12 to 18 months.
It further said that the low reserve adequacy threatens continued access to external financing at moderate costs that in return may raise government liquidity risks.
Moody’s International confirmed its decision of the B3 rating that reflects “potential for robust growth”.
However, the rating agency expressed hope that this robust growth may just be because of the ongoing improvements in energy supply and physical infrastructure.
According to the report, Pakistan’s economy can possibly sustain internal and external jolts just because of its improvement in energy sector.
The report further stated “these credit strengths balance Pakistan’s fragile external payments position and very weak government debt affordability owing to low revenue generation capacity.”
Moody’s report predicted that during the next fiscal year the rate of inflation will increase from 4 percent to 7 percent, with economic growth reaching more than 5 percent of the Gross Domestic Product (GDP).
The report claimed that the forex reserves had reduced by 40 percent since October 2016.
However, the report declared no change in Ba3 local currency bond, B2 foreign currency bond, Caa1 foreign currency deposit ceiling and deposit ceilings.