S&P Global Ratings has downgraded Pakistan’s long-term sovereign credit rating to ‘CCC+’ from ‘B-‘. Pakistan, whose foreign exchange reserves are already below $7 billion, will continue to under pressure in the coming year, S&P said in a statement. Increasing instability due to the current political and security situation has exacerbated Islamabad’s problems. Currently, Pakistan’s foreign exchange reserves have reached $6.1 billion.
“Pakistan’s already low foreign exchange reserves will remain under pressure in 2023, barring a material decline in oil prices or an increase in foreign aid,” said S&P analysts Andrew Wood and Yefarn Fua. S&P added that political uncertainty is expected to rise in the coming quarters, with pressure from the opposition to hold snap elections.
Earlier, ratings agencies Moody’s and Fitch downgraded Pakistan’s long-term foreign currency default rating (IDR) to ‘CCC+’ from ‘B-‘. This will make borrowing more difficult and the country will find it difficult to manage debt payments of more than $30 billion this fiscal year.
Fitch, on the other hand, said the downgrade reflects a further deterioration in Pakistan’s external liquidity and funding situation and a decline in foreign exchange reserves. This is partly the result of widespread flooding, which has hampered Pakistan’s efforts to manage its twin fiscal and current account deficits.
Fitch typically does not assign an outlook to sovereigns of ‘CCC+’ or below, it said in a statement.
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