High external funding risks remain: Fitch

The global ratings agency Fitch on Wednesday maintained Pakistan’s long-term foreign currency issuer default rating at ‘CCC’ and noted that it expects general elections to take place as scheduled and produce a coalition government “along the lines of Shehbaz Sharif’s government”. The unchanged credit rating is based on the last month’s IMF staff-level agreement on the first review of Pakistan’s nine-month standby arrangement (SBA). But US-based Fitch Ratings — one of three leading global rating agencies — expressed concern over the uncertainties surrounding the upcoming elections and the potential for ensuing political volatility, which could impact the implementation of structural reforms and pose economic challenges. Fitch had previously downgraded Pakistan’s rating from ‘CCC+’ in October 2022 to ‘CCC-’ in February 2023 before upgrading again to ‘CCC’ in July. On Wednesday, the rating agency saw high but easing external risks. It said the ‘CCC’ rating reflects high external funding risks amid high medium-term financing requirements, despite some stabilisation and Pakistan’s strong performance on its current SBA with the IMF staff. “We expect elections to take place as scheduled in February and a follow-up IMF programme to be negotiated quickly after the SBA finishes in March 2024, but there is still the risk of delays and uncertainty around Pakistan’s ability to do this,” Fitch said in a statement, adding that the “elections could endanger the durability of recent reforms and leave room for renewed political volatility”.