ISLAMABAD: Moody’s Investors Service (“Moody’s”) has changed Pakistan’s outlook from negative to stable affirming Pakistan’s local and foreign currency long-term issuer and senior unsecured debt ratings at B3. The change in outlook is primarily driven by the improvement in the balance of payments position, supported by policy adjustments and currency flexibility. The Finance Ministry in a statement said the up-gradation of outlook to stable is an affirmation of the government’s success in handling the country’s economy. 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. 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. Moody’s expects Pakistan’s current account deficit to continue narrowing in the current and next fiscal year, averaging around 2.2% of the GDP, from more than 6% in fiscal 2018 and around 5% in fiscal 2019. Pakistan’s economy is among the largest across similarly rated peers, while we estimate its growth potential to be around 5%, higher than the median for B3 rated sovereigns.” The report further outlines scenarios for upward or downward changes in Pakistan’s credit rating. “Upward pressure on Pakistan’s rating would develop if ongoing fiscal reforms were to raise the government’s revenue base and debt affordability and lower its debt burden markedly beyond Moody’s current expectations.