Moody’s lifts Pakistan’s rating to “CAA1” to stronger external financial

Moody’s said on Wednesday that it had increased Pakistan’s credit rating from a notch on “CAA1” by “CAA2” due to the improvement of the external financial position and assigned a “steady” perspective in the country.

The announcement came within a few hours by Finance Minister Muhammed Aurangzeb, saying there was more room for the Central Bank to reduce the country’s key policy rate from 11% to the rear of positive economic indicators.

“Improving credit assessment is a sign that economic policies are heading in the right direction,” Prime Minister Shehbaz Sharif said in a statement.

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Pakistan’s international bonds increased by 1 cents to 90 and 100 cents on the dollar after upgrading ratings. Most of them began at the highest of the beginning of 2022, when fears of a complete debt crisis sent them to sink to just 30 cents.

Moody’s decision to increase evaluation from a notch after Fitch and S&P did the same will help Pakistan’s ability to increase external debt. Pakistan reports that its economy is on a recovery route after a $ 7 billion rescue has helped to stabilize.

“We have changed the prospects for the Pakistani government to be stable from positive,” Moody’s said in a statement.

“Upgrading to CAA1 reflects the improvement of Pakistan’s external position, backed by its progress in implementing the reform under the IMF’s Extended Funded Funding (EFF) program,” he said.

Pakistan’s debt affordability has improved, but remains one of the weakest among the scoring rulers, Moody’s said, adding that the CAA1 rating also reflects the country’s weak governance and a high degree of political uncertainty.

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Aurangzeb said in a rally of businessmen in Islamabad in front of Moody’s announcement that he was expecting to improve Pakistan’s credit rating by other organizations after Fitch and S&P.

“We are optimistic about progress in the policy rate that goes south,” he added.

Aurangzeb said it was his personal view that there was more room for a reduction in the end of the year, adding that it was for the central bank to make the final call on the issue.

The next policy interest rate announcement is due to September 15.

The Central Bank abandoned its main interest rate unchanged at 11% on July 30, with the expectation of analysts. In a Reuters poll they had predicted a decrease of 50 to 100 base points.

The bank said inflation prospects had worsened due to increasing energy prices.

Inflation accelerated to 4.1% on a year -long basis in July.