Unchanged rating

INTERNATIONAL ratings agency Moody’s decision to keep Pakistan’s long-term credit rating unchanged at Caa3, with stable outlook, is reflective of the poor standing of a cash-strapped nation in global financial markets. The rating indicates a higher probability of default and a greater degree of investment risks amid weak debt affordability. It also takes into account Pakistan’s low growth rate and high exposure to extreme weather events, which can increase economic and social costs, with high debt-servicing requirements reducing the fiscal flexibility to undertake key expenditures on infrastructure and social initiatives. Global rating agencies have long ranked the country among ‘speculative grade’ economies, with very high credit risk owing to the liquidity crisis and external vulnerability challenges. A year ago, Moody’s had downgraded Pakistan from Caa2 to Caa3, relegating it to almost the bottom of the riskiest markets, shortly after the IMF suspended its funding support due to the authorities’ failure to meet the goals of the previous Fund programme.