ISLAMABAD: The Standard & Poor’s credit rating agency has affirmed stable outlook of Pakistan’s economy. It also declared ‘B’ long-term and ‘B’ short-term sovereign ranking while maintaining the long-term outlook at stable rating.
The rating agency stated that Pakistan has been facing a muted economic outlook, along with a highly stressed external position, as the government attempts to address its elevated fiscal deficit and debt stock.
According to the rating agency “We expect the sovereign’s credit metrics to remain under pressure over the medium term as a result.”
The government’s securing of an IMF reform and funding programme will help address near-term funding risks. Nevertheless, continued reform progress will likely be necessary to address Pakistan’s credit vulnerabilities.
The agency stated, “We are affirming our ‘B-‘ long-term and ‘B’ short-term sovereign credit ratings on Pakistan. The stable outlook reflects our expectations that funding from the IMF and other partners will be sufficient for Pakistan to meet its considerable external obligations over the next one to two years.”
The rating agency also affirmed ‘B-’ long-term issue rating on Pakistan’s senior unsecured debt and sukuk trust certificates. It said Pakistan’s rating remained constrained by a narrow tax base and domestic and external security risks, which continue to be high.
It forecast Pakistan’s economic growth to slow down to 2.4 percent of the GDP during the current fiscal year, a 12-year low. Taken together with the country’s relatively fast population growth of approximately 2 percent per year, real per capita economic growth will fall to an anaemic 0.4 percent.
That will contribute to a decline in the country’s 10-year weighted average per capita growth to 1.8 percent, below the global average of 2.3 percent for economies at a similar level of income.