KARACHI: S&P Global Ratings on Monday lowered Pakistan’s sovereign credit rating one notch to ‘B-‘ from ‘B’, citing diminished growth prospects and elevated external and fiscal stresses.
In S&P’s system, B- is six steps below an investment grade rating.
S&P said it lowered Pakistan’s ranking as the country’s economic outlook as well as its external position deteriorated.
The credit rating agency stated that its stable outlook for Pakistan reflected its expectation that Pakistan will secure sufficient funding to meet its external financing requirements over the next twelve months.
Pakistan is set to receive a $3 billion loan package from the United Arab Emirates (UAE) in-order to help bridge a yawning current account deficit and shore up foreign reserves.
S&P noted that “while Pakistan has secured financial aid from bilateral partners to address its immediate external financing needs, we believe that fiscal and external imbalances will remain elevated”.
The credit rating agency maintained that talks with the International Monetary Fund (IMF) took longer than anticipated and that any resulting reforms, whether under the programme or otherwise will be less advantageous than previously hoped. “S&P believes the reform timeline will be more protracted in nature,” it added.
Fitch in December downgraded Pakistan’s long-term foreign currency issuer default rating to ‘B-‘ from ‘B’, citing a rise in external financing risk from low reserves and high external debt repayments, along with a continued deterioration in the economy’s fiscal position.