Fitch upgrades Pakistan’s rating after IMF deal

ISLAMABAD: Fitch Ratings, a global rating agency, has upgraded Pakistan’s long-term foreign-currency issuer default rating (IDR) to CCC from CCC- on Monday, following the country’s agreement with the International Monetary Fund (IMF) on a $3 billion stand-by arrangement (SBA).

According to Fitch, the upgrade reflects Pakistan’s improved external liquidity and funding conditions after securing the IMF deal, which will support the government’s efforts to stabilize the economy from recent external shocks, such as floods, commodity price hikes, and regional tensions.

The rating agency also noted that Pakistan has taken measures to address shortfalls in revenue collection, energy subsidies, and exchange rate policies that had stalled the previous IMF programme.

Finance Minister Ishaq Dar welcomed the upgrade and congratulated Prime Minister Shehbaz Sharif, the nation, the government allies, and his economic team for this achievement.

He said that this was another positive news towards the current economic revival journey. He said that the government had prioritised the national interests while signing the IMF deal.

The IMF and Pakistan reached a staff-level agreement on a nine-month SBA on June 30, just hours before the expiry of a $6.5 billion extended fund facility (EFF) that was agreed upon in 2019.

The new SBA is expected to be approved by the IMF’s Executive Board by mid-July, which will unlock an immediate disbursement of $1.2 billion, with the remaining $1.8 billion scheduled after reviews in November and February 2024.

The SBA will also catalyse other funding from multilateral and bilateral partners, and create space for social and development spending.