Moody’s changes Pakistan’s outlook to negative from stable

SINGAPORE: Moody’s Investors Service on Wednesday while affirming Pakistan’s B3 rating, changed the outlook from stable to negative.

The report stated: “The decision to change the outlook to negative is driven by heightened external vulnerability risk. Foreign exchange reserves have fallen to low levels and, absent significant capital inflows, will not be replenished over the next 12-18 months. Low reserve adequacy threatens continued access to external financing at moderate costs, in turn potentially raising government liquidity risks.”

Moody’s decision to affirm the B3 rating shows the country’s "potential for a robust growth", which it said was supported by "ongoing improvements in energy supply and physical infrastructure".

The report said that due to improvement in the energy projects, the economy will be able to sustain internal and external jolts.

“These credit strengths balance Pakistan's fragile external payments position and very weak government debt affordability owing to low revenue generation capacity,” the report further said.

It also said that Pakistan’s economic growth will be more than five percent of the Gross Domestic Product.

The report mentioned that the next fiscal year, the rate of inflation will increase from four percent to seven percent.

From October 2016, the foreign exchange reserves have been reduced by 40 percent, the report said.

Moody’s said that the Ba3 local currency bond, B2 foreign currency bond, Caa1 foreign currency deposit ceiling and deposit ceilings will be unchanged.