Moody’s downgrades Pak’s credit outlook amid political uncertainty

WEB DESK: In its latest report, credit rating agency Moody’s has downgraded Pakistan’s credit outlook to negative, citing ongoing political instability as a significant risk factor. The uncertainty stemming from inconclusive election results has been labelled as a credit negative by the agency.

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Moody’s highlighted concerns regarding Pakistan’s ability to swiftly negotiate a new agreement with the International Monetary Fund (IMF) after the current programme expires in April 2024. The agency noted that the uncertainty surrounding this issue remains very high.

The general election held on 8 February in Pakistan, with the final vote count concluding on 11 February, has further contributed to the prevailing uncertainty. According to Moody’s, Pakistan’s external financing needs are estimated to be around $22 billion for fiscal 2025, with annual requirements of approximately $25 billion for fiscal years 2026 and 2027.

With the expiration of the current IMF programme looming, the country will need to formulate a comprehensive financing plan to address its substantial funding requirements in the coming years.

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Despite the negative outlook, earlier trading at the Pakistan Stock Exchange (PSX) witnessed a surge in share prices on Wednesday, attributed to increased clarity on the political front. The benchmark KSE-100 index rose by 1166.11 points, or 1.9 per cent, reaching 62,393.03 at 10:43 am from the previous close of 61,226.92. The market closed at 62,153.84 points, recording a gain of 926.92 points or 1.51 percent.

The future trajectory of Pakistan’s economy and financial markets will likely be heavily influenced by the resolution of political uncertainties and the successful negotiation of a new IMF programme.