World News | Moody’s downgrades Pakistan to ‘C’ after seven years

Islamabad [Pakistan]October 8 (ANI): New York-based credit rating agency Moody’s Investors Service has downgraded Pakistan’s domestic and foreign currency and senior unsecured debt ratings to Caa1 from B3, citing government liquidity and external vulnerability risks increase as well as increased debt sustainability risks, local media reported.

“The outlook remains negative,” the New York-based rating agency said amid flooding in Pakistan, Dawn reported.

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Debt affordability has been a longstanding credit weakness in Pakistan and will remain extremely weak for the foreseeable future.

Seven years later (March 2015), the downgrade pushed the country into Category C.

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Pakistan has strongly opposed Moody’s downgrade decision, saying it was made unilaterally, based on immature data, and did not paint the true picture due to information gaps and contradictions.

In June, Moody’s also downgraded Pakistan’s outlook to negative from stable due to delays in an economic rescue deal with the International Monetary Fund (IMF).

“The decision to turn the outlook to negative is driven by heightened risks of Pakistan’s external vulnerabilities and uncertainty over the sovereign’s ability to obtain additional external financing to meet its needs,” Dawn quoted Moody’s in a statement as saying.

Meanwhile, in the first 10 months of the current fiscal year (July-April), Pakistan’s current account deficit widened to $13.8 billion, compared with $543 million a year earlier, Dawn reported.

According to the International Monetary Fund, as of the end of April, Pakistan’s foreign exchange reserves had fallen to $9.7 billion, enough to cover less than two months’ worth of imports. That compares with $18.9 billion in reserves at the end of July last year.

Moody’s expects a current account deficit of 4.5-5% of GDP for the current fiscal year, slightly higher than the government’s forecast.

Furthermore, the next elections in Pakistan will be held in mid-2023. Moody’s believes it will be difficult for political parties to continue implementing significant revenue increases ahead of the election, especially in a high inflation environment. (ANI)

(This is an unedited and auto-generated story from the Syndicated News feed, the body of the content may not have been modified or edited by LatestLY staff)