Global rating agency Fitch on Monday upgraded Pakistan’s long-term foreign currency issuer default rating (IDR) to ‘CCC’ from ‘CCC-’, citing the country’s improved external liquidity and funding conditions following the staff-level agreement with the International Monetary Fund (IMF.
“The upgrade reflects Pakistan’s improved external liquidity and funding conditions following its Staff-Level Agreement (SLA) with the IMF on a nine-month Stand-by Arrangement (SBA) in June,” said Fitch Ratings.
“We expect the SLA to be approved by the IMF board in July, catalysing other funding and anchoring policies around parliamentary elections due by October.
“Nevertheless, program implementation and external funding risks remain due to a volatile political climate and large external financing requirement,” it said.
Pakistan had secured the badly-needed $3bn short-term financial package from the IMF last month, giving the economy a much-awaited respite as it teeters on the brink of default.
The executive board of the IMF will meet on July 12 to review the $3 billion Stand-by Arrangement (SBA).
Talking about IMF-driven reforms taken by the government, the agency noted that Pakistan had recently taken measures to address shortfalls in its revenue collection, energy subsidies and policy inconsistent with a market-determined exchange rate, including import financing restrictions.
It said these issues had held up the last three reviews of Pakistan’s previous IMF programme, before its expiry in June.
