ISLAMABAD: In a positive development, Fitch Ratings has upgraded Pakistan’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CCC+’ from ‘CCC’. “This upgrade reflects increased confidence over continued external funding, supported by Pakistan’s staff-level agreement (SLA) with the International Monetary Fund (IMF) on a new 37-month, $7 billion Extended Fund Facility (EFF)”, the statement said.
The upgrade is attributed to strong performance under the previous IMF arrangement, which helped Pakistan fiscal deficits and rebuild foreign exchange reserves. Fitch expects the IMF Board to approve the new $7 billion program by the end of August. However, Pakistan must secure new funding assurances from bilateral partners.
Fitch forecast the current account deficit (CAD) to stay relatively contained at about $4 billion (about 1% of GDP) in FY25, after about $700 million in FY24, given tight financing conditions and subdued domestic demand.
On the external front, Pakistan’s foreign exchange reserves have improved. The SBP is rebuilding reserves, with official gross reserves estimated to have risen to over $15 billion in June 2024, and expected to reach nearly $22 billion by the end of FY26.
Earlier, on Monday, Pakistan’s Finance Minister Muhammad Aurangzeb updated Fitch Ratings representatives regarding Pakistan’s recent Staff-Level Agreement (SLA) with the International Monetary Fund (IMF) and also outlined various steps aimed at bolstering the economy.
The briefing underscored the positive effects of the nine-month Stand By Agreement with the IMF on Pakistan’s macroeconomic health.
The Finance Minister conveyed to Fitch the confidence multilateral institutions have in financing Pakistan’s projects. Fitch Ratings representatives lauded the ambitious goals and fiscal steps adopted by the government of Pakistan, admitting the improvement in the nation’s economic indicators.
