Profit MOODY’S UPGRADES PAKISTAN’S DEBT RATINGS TO CAA2, OUTLOOK NOW POSITIVE In partnership with
Thursday, 29 August, 2024 I | 23 Safar, 1446
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Rs 20.00 | Vol XV No 53 I 8 Pages I Karachi Edition
Credit rating warns that weak debt affordability will continue to pose high debt sustainability risks, with interest payments to consume half of revenue PROFIT
MONITORING DESK
OODY’s Ratings has upgraded Pakistan’s local and foreign currency issuer and senior unsecured debt ratings to Caa2 from Caa3, with the outlook revised to positive from stable, as announced on Wednesday. The global credit rating agency cited Pakistan’s improving macroeconomic conditions and slightly better government liquidity and external positions as key factors behind the upgrade. Moody’s noted that Pakistan’s default risk has now decreased to levels consistent with a Caa2 rating. This marks a turnaround from February 2023, when Moody’s had downgraded Pakistan’s ratings. The rating agency pointed to the increased certainty of Pakistan’s external financing sources, following the country’s staff-level agreement with the International Monetary Fund (IMF) on July 12, 2024, for a 37-month Extended Fund Facility (EFF) worth $7 billion. The IMF Board is expected to approve the EFF in the coming weeks. Moody’s report highlighted that Pakistan’s foreign exchange reserves have approximately doubled since June 2023, though they still fall short of what is needed to meet its external financing requirements. The agency emphasized that Pakistan remains dependent on timely financial support from official partners to meet its external debt obligations. However, Moody’s also warned that Pakistan’s very weak debt affordability continues to pose a high debt sustainability risk, with interest payments expected to consume about half of government revenue over the
next two to three years. The rating agency noted that Pakistan’s weak governance and high political uncertainty remain significant challenges. The positive outlook, however, reflects potential upside risks. Moody’s suggested that if Pakistan can continue implementing reforms, particularly those that raise government revenue, it could further reduce its liquidity and external vulnerability risks and improve its fiscal position, bolstered by the ongoing IMF program. Moody’s also upgraded the backed foreign currency senior unsecured ratings for The Pakistan Global Sukuk Programme Co Ltd. to Caa2 from Caa3, with a positive outlook. Additionally, the agency raised Pak-
Rupee climbs to five-week high at Rs278.32 against dollar KARACHI
NEWS DESK
The Pakistani rupee surged to a five-week high, reaching Rs278.32 against the US dollar in the inter-bank market. The currency appreciated by Rs0.10, bolstered by expectations of substantial foreign investments and new external loans. Data from the State Bank of Pakistan (SBP) indicates this marks the third consecutive day of gains, with the rupee strengthening by a total of Rs0.34. In the open market, the Exchange Companies Association of Pakistan (ECAP) reported that the local currency remained stable at Rs280 per dollar for the sixth consecutive working day.
Federal cabinet approves rightsizing of 82 departments in first phase Cabinet also establishes a committee to propose measures for protecting the rights of employees affected by these mergers PROFIT
MONITORING DESK
The federal cabinet approved the abolition and merger of 82 departments and agencies under six federal ministries and divisions, consolidating them into 40 entities in the first phase of the rightsizing initiative. The cabinet meeting, chaired by Prime Minister Shehbaz Sharif, also established a committee to propose measures for protecting the rights of employees affected by these mergers and abolitions. The 82 entities being merged or abolished will be transformed into more effective institutions through digitization, smart management, efficient governance, and transparency. The cabinet formally approved the continuation of the austerity policy, which includes a complete ban on the purchase of new vehicles, equipment, fresh employment, and foreign visits at public expense.
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The rupee’s recent appreciation follows Saudi Arabia’s interest in acquiring a 15% equity stake in Pakistan’s Reko Diq project and contributing to infrastructure development near the site. Market sentiment was further uplifted by assurances of $4 billion in new foreign commercial loans from Middle Eastern banks, expected to materialize by the next fiscal year. These developments are critical for Pakistan to meet the International Monetary Fund’s (IMF) requirement to close a $2 billion financing gap, a key condition for accessing the $7 billion IMF loan programme.
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istan’s local and foreign currency country ceilings to B3 and Caa2 from Caa1 and Caa3, respectively. Despite these upgrades, Moody’s cautioned that Pakistan’s external financing needs will remain substantial, with approximately $26 billion required for fiscal 2025, including $22 billion in external principal debt repayments. The financing needs for fiscal 2026-2027 are projected to be similar. The agency also noted the risk that the coalition government, formed after the February 2024 elections, may face challenges in implementing revenue-raising reforms without triggering social unrest, which could delay or jeopardize financing from official partners.
PM lauds Moody’s credit rating upgrade for Pakistan ISLAMABAD
STAFF REPORT
Prime Minister Muhammad Shehbaz Sharif on Wednesday expressed his satisfaction with Global rating agency Moody’s recent upgrade of Pakistan’s credit rating and attributed the achievement to the hard work of the economic team and the blessings of the Almighty. Chairing a review meeting on the nation’s economic development and investment strategies, Prime Minister Shehbaz Sharif stated that Pakistan’s economy had been rescued from default by prioritizing the country’s needs over his own political career during his pre-
Pakistan seeks UN role in stopping cross-border TTP attacks ISLAMABAD
STAFF REPORT
Pakistan on Wednesday informed the United Nations delegation that the banned Tehreek-e-Taliban Pakistan (TTP) has been using Afghan soil for attacks on the country and urged the world body to play its role in stopping the cross-border terrorism. Federal Interior Minister Mohsin Naqvi raised the issue during a meeting with the UN delegation led by UN Special Representative for Afghanistan Indrika Ratwatte. “Though terrorism is a global issue, Pakistan has been affected the most by the menace,” according to an official statement quoting the minister as saying. The high-level delegation included UN Resident Coordinator Mohamed Yahya, Fady El Meouchy, Special Assistant to the DSRSG, and Head of the UN mission in Afghanistan Malick Ceesay. Earlier, the minister welcomed the UN delegation at the Ministry of Interior. The minister, on the occasion, informed the delegation that terrorists were using Afghan soil against Pakistan. “Pakistan is playing an important role for peace and stability in Afghanistan,” he said, and
vious term as prime minister. He expressed satisfaction that, after stabilization, the country’s economy was now on the path of progressing and development. He noted that the benefits of the government’s focus on national interests over political gains were now evident in the economy. The prime minister also pointed out that Moody’s Caa2 rating for Pakistan was an international endorsement of the government’s economic strategies. He expressed optimism that the economy would maintain its positive trajectory and continue to progress.
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Govt fails to secure $9b debt rollovers, receives only $426m in July IMF loan package faces delays as Pakistan struggles with foreign debt rollovers PROFIT
MONITORING DESK
added, “Pakistan has hosted Afghan refugees for decades. However, the repatriation of those foreigners living in the country illegally has started in phases.” However, the minister assured the delegation, no action was being taken against those who possessed legal documents. Pakistan has grappling with a sharp rise in terrorist attacks since the Taliban’s return to power in the neighbouring Afghanistan and Islamabad has repeatedly demanded for action against terrorist hideouts inside Afghanistan.
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The government failed to secure $9 billion in debt rollovers in July, managing to receive only $426 million from international lenders, according to an official report released by the Ministry of Economic Affairs. The monthly disbursement report highlighted that no new loans were obtained from foreign commercial banks or bilateral creditors, despite the government’s urgent need to secure foreign funding. The Ministry of Economic Affairs report also noted that the World Bank provided a $132.4 million loan last month, with funds allocated to projects in Sindh, Punjab, and the National Transmission and Dispatch Company (NTDC). The Asian Development Bank (ADB) disbursed $52 million for multiple schemes, while China contributed $97 million for the Pakistan Multi-Mission Satellite project.
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