ISLAMABAD: Moody’s Investors Service has assigned a definitive rating of B3 to Pakistan’s global bond offering, quoting, “the outlook is stable.”
Moody’s definitive ratings for these debt obligations confirm the provisional ratings assigned on September 18, 2015.
Pakistan’s B3 issuer rating reflects moderate economic strength with a supply-constrained economy that had been resistant to structural change, reported Moody’s.
Although the scale of the economy is relatively large, globally, Pakistan’s per-capita income level is relatively very low. Implementation of the China-Pakistan Economic Corridor (CPEC) will overtime, bolster growth through investment in transportation and power generation infrastructure, the statement said.
However, the government has gained significant traction on reforms under the IMF programme, key goals of which include deficit reduction, resolving constraints in the energy sector, and the privatisation of several state-owned enterprises.
The statement further said that the government debt rollover risk was also reduced by sizeable recourse to domestic bank lending and, to some degree, by a debt structure which consisted of long-tenor credits from multilateral and official bilateral creditors.
Challenging operating environment, susceptibility to economic risks and political shocks, coupled with a high concentration to the sovereign, links the health of the banking system very closely to that of the government.
The stable outlook represents our expectation of balanced upside and downside risks. Upward pressures stem from support from multilateral and bilateral lenders, which bolster an improving foreign reserve position and on-going reform progress, the report added.
It further added that deeply entrenched weaknesses in the power sector also acted as a bottleneck to growth and while Pakistan’s government financing was mainly from domestic sources and system-wide external debt was declining as a percent to GDP, the level of external public debt posed a moderate degree of credit risk.