Moody revises Pakistan’s rating outlook to stable

ISLAMABAD: Moody’s Investors Service has revised the outlook on Pakistan’s foreign currency government bond rating to stable from negative. Concurrently, Moody has affirmed the government’s issuer rating and senior unsecured rating at Caa1, said a statement issued by the Ministry of Finance here on Monday. The Moody’s decision to revise the outlook on Pakistan’s foreign currency rating is primarily based on a stabilisation in the country’s external liquidity position, supported by the government’s strong commitment to reforms under an ongoing programme with the International Monetary Fund. 
A key factor behind Moody’s once-notch downgrade and outlook revision for Pakistan in July 2012 was deterioration in the external liquidity position, widening current-account deficit, large outflows from the financial account, decline in international reserves to very low levels. This situation has reversed over the past year. Secondly, Pakistan is making steady progress in meeting reform benchmarks under the current, 36 months $6.8 billion Extended Fund Facility with the IMF. The government has met 10 of 17 structural benchmarks and appears to be on track towards achieving the remainder. These goals include tax and energy sector reforms, privatisation of state-owned enterprises. “We think the authorities will persevere to achieve the overall intent of the package. Upward triggers to the rating would stem from successful completion of the IMF programme, improvements in the external liquidity position, continued fiscal consolidation, progress on structural reforms and eventually aiding a shift to a higher growth trajectory. Domestic political viability and steady relations with international donors would further support the rating.” The statement said the issuer’s governance and/or management have materially increased. The issuer’s fiscal or financial strength, including its debt profile, has materially increased. The issuer has become less susceptible to event risks. Finance Minister Ishaq Dar appreciated and welcomed the revision of Pakistan’s foreign currency government bonds rating from negative to stable by Moody’s Investors Service. 

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