HONG KONG: Fitch, the global rating agency, has upgraded Pakistan’s long-term foreign currency issuer default rating (IDR) from ‘CCC-‘ to ‘CCC’ on Monday. The upgrade reflects improved external liquidity and funding conditions, primarily driven by the staff-level agreement between Pakistan and the International Monetary Fund (IMF) on a nine-month Stand-by Arrangement (SBA) in June.
Pakistan, facing a critical financial situation, recently secured a much-needed $3 billion short-term financial package from the IMF. This injection of funds has provided the country’s economy with a welcome relief, as it grapples with the possibility of default.
IMF Executive Board to Review $3 Billion SBA for Pakistan
The IMF executive board is scheduled to meet on July 12 to review the $3 billion Stand-by Arrangement (SBA) for Pakistan. Fitch expects the SBA to be approved by the IMF board in July, which will serve as a catalyst for additional funding and provide a framework for policies leading up to the parliamentary elections expected to take place by October.
While the rating upgrade indicates positive developments, Fitch also acknowledges the implementation challenges and external funding risks that persist. The agency highlights the volatile political climate in Pakistan and the country’s significant external financing requirements as factors contributing to these risks.
The upgrade in Pakistan’s rating reflects the positive impact of the IMF agreement on the country’s external liquidity and funding conditions. It is expected to provide stability and support Pakistan’s ongoing efforts to address its financial challenges. However, sustained efforts and careful implementation of economic policies will be necessary to mitigate risks and maintain the positive trajectory for the country’s economic stability and growth.
