Fitch maintains ‘CCC’ rating for Pakistan amid high external funding risks

WEB DESK: In a recent development, Fitch Ratings, the American credit rating agency, has affirmed a ‘CCC’ Long-Term Foreign-Currency Issuer Default Rating (IDR) for Pakistan.

Typically refraining from assigning outlooks to sovereigns rated ‘CCC+’ or below, Fitch Ratings highlighted several factors contributing to the positive trajectory of Pakistan’s currency.

One key element was the approval of Pakistan’s IMF staff-level agreement (SLA) in July 2023, following its initiation in November.

This agreement, approved by the IMF Executive Board, significantly influenced the favorable rating.

The performance of the caretaker government also emerged as a crucial factor in enhancing the currency rating.

However, it is noteworthy that the standby arrangement (SBA) with the IMF is slated to expire in March 2024.

Fitch Ratings foresees that the government elected in the February 2024 election will promptly pursue another IMF programme to maintain the positive momentum.

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Despite these optimistic prospects, Fitch Ratings warned of potential challenges.

Any further delays to elections or a resurgence of political volatility could pose risks to IMF negotiations and external funding, adding an element of uncertainty to the economic landscape.

The intricacies of the upcoming political scenario and its impact on international financial relations will undoubtedly be closely monitored.