Business

S&P Global Ratings downgrades Pakistan’s credit score

Published

1 year ago

Farwa

S&P decreases Pakistan’s credit score from B- to CCC+.
Agency maintains Pakistan’s outlook stable.
Fitch and Moody’s have already ranked Pakistan’s bonds below investment grade.

KARACHI: S&P Global Ratings has downgraded Pakistan’s credit score due to the series of shocks — from flooding to surging inflation — that has deteriorated the country’s external, fiscal and economic metrics, reported The News.

The nation’s credit score was downgraded from B- to CCC+ by S&P, which expects Pakistan’s dwindling foreign reserves to remain under pressure in the coming year, just as political risks linger, according to a statement.

“Pakistan’s already low foreign exchange reserves will remain under pressure throughout 2023, barring a material decline in oil prices or a step-up in foreign assistance,” S&P analysts Andrew Wood and YeeFarn Phua wrote.

The country also faces elevated political risks which may affect its policy trajectory over the next year.

Fitch Ratings and Moody’s Investors Service already rank the nation’s $7.8 billion in foreign bonds at seven notches below investment grade, the equivalent of S&P’s CCC+ rating, on par with El Salvador and Ukraine. S&P also raised the outlook for Pakistan to stable from negative on Thursday.

The country is facing an economic crisis with only enough reserves to cover one month of imports, a dollar shortage and a delay in its loan programme with the International Monetary Fund. Investors are pessimistic about Pakistan’s ability to keep up with its foreign debt obligations, with long-term dollar bonds continuing to trade at distressed levels despite the payment of a $1 billion bond this month.

S&P said this year’s severe floods, surging food and energy inflation, as well as rising global interest rates, will further depress Pakistan’s economic and fiscal outcomes, with refinancing challenges over the medium term.

Pakistan’s unprecedented floods in the summer killed more than 1,700 people, inundated a third of the nation and cut the nation’s growth by half. The floods have left about $32 billion in damages and losses to the nation’s economy.

Meantime, the current administration is set to end by August of next year or earlier, meaning it has limited time to implement economic reforms.

“We expect political uncertainty to remain elevated over the coming quarters, with continued pressure from the opposition to hold early elections,” the S&P analysts wrote.

The agency maintained its outlook at “stable”.

Business

Pakistan’s $1.1 billion loan tranche is approved by the IMF board.

Published

1 hour ago

Farwa

The cash is the third and last installment of a $3 billion standby agreement with the international lender that it obtained to prevent a sovereign default last year and that expires this month.

Following the discussion of Pakistan’s request for the release of funds at today’s IMF Executive Board meeting in Washington, the final tranche was authorized.

Pakistan and the International Monetary Fund (IMF) came to a staff-level agreement last month about the last assessment of a $3 billion loan package.

The total amount of $1.9 billion that the nation has received thus far is divided into two tranches: $1.2 billion in July and $700 million in January 2024.

According to Finance Minister Muhammad Aurangzeb, Islamabad could have a staff-level agreement on the new program by early July. Pakistan is asking the IMF for a fresh, longer-term loan.

In order to support macroeconomic stability and carry out long-overdue and difficult structural changes, Islamabad says it is seeking a loan for a minimum of three years; however, Aurangzeb has reluctant to specify the specific program in question. If approved, it would be Pakistan’s 24th IMF bailout.

See Also: Pakistan formally requests new IMF assistance

The event transpired on the day following Prime Minister Shehbaz Sharif’s meeting with IMF Managing Director Kristalina Georgieva, during which he reaffirmed the government’s resolve to restart Pakistan’s economy.

During the meeting held in conjunction with the World Economic Forum Special Meeting, the prime minister announced that he had given his finance minister, Muhammad Aurangzeb, strict instructions to implement structural reforms, maintain strict fiscal discipline, and pursue prudent policies that would guarantee macroeconomic stability and continuous economic growth.

Georgieva was commended by him for helping Pakistan obtain the $3 billion Standby Arrangement (SBA) from the IMF last year, which was about to be finalized.

Business

Macroeconomic circumstances in Pakistan have improved.

Published

1 hour ago

Farwa

By virtue of the Board’s resolution, SDR 828 million, or roughly $1.1 billion, can be disbursed immediately, increasing the total amount disbursed under the arrangement to SDR 2.250 billion, or roughly $3 billion.

After being adopted by the Executive Board on July 12, 2023, Pakistan’s nine-month SBA effectively served as a framework for financial support from both bilateral and multilateral partners, as well as a policy anchor to resolve imbalances both domestically and internationally.

According to the official announcement from the IMF, Pakistan’s macroeconomic conditions have improved during the program. Given the ongoing recovery in the second half of the fiscal year, growth of two percent is anticipated in FY24.

With a primary surplus of 1.8 percent of GDP in the first half of the fiscal year 2024—well ahead of expectations and putting Pakistan on track to meet its target primary surplus of 0.4 percent of GDP by the end of the fiscal year—the country’s fiscal condition is still strengthening.

Even while it is still high, inflation is still falling and should end up at about 20 percent by the end of June if data-driven and adequately tight monetary policy is continued.

In contrast to 11.4 per cent last year, the IMF predicted in an official statement that Pakistan’s tax collection and grants will stay at 12.5% of GDP in FY2024.

After remaining at 7.8% of GDP in FY2023, the deficit is predicted to stay at 7.5% of GDP in FY2024.

Business

Pakistan’s fuel prices should drop.

Published

2 hours ago

Farwa

At 0423 GMT, U.S. West Texas Intermediate crude prices fell 13 cents, or 0.16%, to $82.50 a barrel, while Brent crude futures down 10 cents, or 0.11%, to $88.30 a barrel.

Both benchmarks’ front-month contracts saw losses of over 1% on Monday.

on line with the worldwide trend, the price of gasoline is anticipated to decrease by Rs. 5.4 per liter on the local market. In the same way, buyers in the Pakistani market may see a drop in the price of diesel of Rs8 a litre.

Additionally, it is anticipated that the prices of light fuel and kerosene will decrease by Rs5.40 and Rs8.3 per liter, respectively.

The finance ministry will receive a summary from the Oil and Gas Regulatory Authority (OGRA), and PM Shehbaz Sharif will be consulted before a final decision is made today.

The federal government raised the cost of gasoline by Rs. 4.53 per liter and diesel by Rs. 8.14 per liter at the most recent review.

At the moment, the price of gasoline was Rs 293.94 per liter, while the price of high-speed diesel was Rs 290.38 per liter.