Fitch upgrades Pakistan to ‘CCC’, Ishaq Dar congratulates nation

F.P. Report

ISLAMABAD: The Fitch Ratings has upgraded Pakistan’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CCC’ from ‘CCC, indicating a positive development towards the betterment of the country’s economy.

Federal Minister for Finance and Revenue, Senator Mohammad Ishaq Dar in a tweet said it was another positive development towards current economic revival journey.
He congratulated Prime Minister, nation, government allies and economic team for this achievement.

“Global Rating Agency “Fitch” upgrades Pakistan’s Long Term Foreign-Currency rating to CCC from IDR (Issuer Default Rating)….Another positive news towards current economic revival journey, AlhamdoLilah…Congratulations to PM @CMShehbaz, the Nation, Govt Allies & Economic Team,” the minister tweeted.

The rating agency has identified key indicators that contributed to the positive development rating for the country which include improvement in easing external financing risks.

It says the upgrade reflects Pakistan’s improved external liquidity and funding conditions following its Staff-Level Agreement (SLA) with the International Monetary Fund (IMF) on a nine-month Stand-by Arrangement (SBA) in June.

“We expect the SLA to be approved by the IMF board in July, catalysing other funding and anchoring policies around parliamentary elections due by October,” it adds.

According to the report, Pakistan has recently taken measures to address shortfalls in government revenue collection, energy subsidies and policies inconsistent with a market-determined exchange rate, including import financing restrictions. These issues held up the last three reviews of Pakistan’s previous IMF programme, before its expiry in June.

Most recently, the government amended its proposed budget for the fiscal year ending June 2024 (FY24) to introduce new revenue measures and cut spending, following additional tax measures and subsidy reforms in February. The authorities appeared to abandon exchange-rate management in January 2023, although guidelines on prioritising imports were only removed in June.

It says IMF board approval of the SBA will unlock an immediate disbursement of USD1.2 billion, with the remaining USD 1.8 billion scheduled after reviews in November and February 2024.

Saudi Arabia and the United Arab Emirates have committed another USD3 billion in deposits, and the authorities expect USD3-5 billion in other new multilateral funding after the IMF agreement. The SBA should also facilitate the disbursement of some of the USD10 billion in aid pledges made at the January 2023 flood relief conference, mostly in the form of project loans (USD2 billion in the budget).

It says Pakistan’s current account deficit (CAD) has narrowed sharply and forecasted at about USD4 billion (1% of GDP) in FY24, after USD3 billion in FY23 and over USD17 billion in FY22.

The report also identified that the country’s reserves were still low and the fiscal deficit was wide. (APP)