KARACHI: The Investors Service of Moody which is a leading global agency, has upgraded the credit rating outlook of Pakistan to ‘stable’ from ‘negative’ ahead of the launch of Sukuk and Eurobond worth around $2 billion in the world markets.
A Moody’s report released on Monday read, “The change in outlook to stable is driven by Moody’s expectations that the balance of payments dynamics would continue to improve, supported by policy adjustments and currency flexibility”.
The experts said “The improvement in the outlook is highly expected to revive foreign investors’ confidence in Pakistan, compelling them to pour-in significant amounts in different sectors of the economy like manufacturing, agriculture and exports and portfolio investment in stocks and debt markets.”
Adviser to Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh said in a tweet “Moody’s upgrades Pakistan’s outlook to B3 ‘stable’ from ‘negative’. The upgradation of outlook to stable is affirmation of government’s success in stabilising the country’s economy and laying a firm foundation for robust long-term growth.”
Moody’s upgrades Pakistan’s outlook to B3 ‘Stable’ from ‘Negative’. The upgradation of outlook to Stable is affirmation of Government's success in stabilising the country’s economy and laying a firm foundation for robust long term growth.
— Dr. Abdul Hafeez Shaikh (@a_hafeezshaikh) December 2, 2019
Federal Minister for Planning, Development and Reforms Asad Umar said in a tweet “Moody’s acknowledges success of stabilisation measures and upgrades Pakistan’s outlook from negative to stable. Should help improve access to financing and reduce its cost.”
Moody's acknowledges success of stabilization measures and upgrades Pakistan outlook from negative to stable. Should help improve access to financing and reduce its cost
— Asad Umar (@Asad_Umar) December 2, 2019
The announcement of Moody pushed the stock market of Pakistan above 40,000 points level on Monday after a gap of 10 months. The benchmark of Pakistan Stock Exchange (PSX) KSE 100 Index surged 2.08%, or 836.57 points, to 40,124.22 points.
The country was expected to float the international bonds by this time, as it paid over $1 billion on Monday against a matured Sukuk floated in November 2014.
The rating agency said “Foreign exchange reserves have fluctuated by around $7-8 billion over the past few months, sufficient enough to cover just two to two-and-a-half months of goods imports.”
He said “Foreigners seriously consider such sovereign credit ratings and outlook before investing in any country across the globe.” He said “This should lead to higher foreign inflows in the country.”
“The hot money in debt instruments may be at around $3-4 billion in the current fiscal year,” he added.
He added “Such developments reduce external vulnerability risks, although foreign exchange reserve buffers remain low and will take time to rebuild.”
“Currently, tight monetary conditions and import tariffs on nonessential goods would also weigh on broader import demand for some time, although Moody’s sees the possibility of monetary conditions easing when inflation gradually declines towards the end of the current fiscal year.
”The report outlines scenarios for upward or downward changes in Pakistan’s credit rating. “Upward pressure on Pakistan’s rating would develop if ongoing fiscal reforms were to raise the government’s revenue base and debt affordability, and lower its debt burden markedly beyond Moody’s current expectations.
“A continued rise in the government’s debt burden, without prospects for stabilisation over the medium term, would also put downward pressure on the rating,” read the Moody’s report.