Moody’s said Wednesday that he had raised Pakistan’s credit qualification in a notch A ‘Caa1’ of ‘Caa2’ due to an improvement of the external financial position and assigned the country a “stable” perspective.
The announcement occurred within a few hours of Pakistan Finance Minister, Mohammed Aurengzeb, said there was more space for the Central Bank to reduce the country’s key policy rate of 11% on the reverse of positive economic indicators.
“The improvement of credit rating is a sign that economic policies are directed towards the right direction,” said Prime Minister Shehbaz Sharif in a statement.
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International Pakistan bonds increased up to 1 cent to between 90 and 100 cents per dollar after the qualifications update. He raised most of them to their maximum since the beginning of 2022, when the fears of a full -fledged debt crisis sent them to just 30 cents.
Moody’s decision to increase the qualification of a notch after Fitch and S&P did the same will help Pakistan’s ability to increase external debt. Pakistan says that his economy is on a recovery route after a rescue of the IMF of $ 7 billion helped stabilize it.
“We change the perspective of the Pakistan government to stable positive,” Moody’s said in a statement.
“The update to CAA1 reflects the external position of improvement of Pakistan, backed by its progress in the implementation of reforms under the IMF extended fund program (EFF),” he said.
The affordability of Pakistan’s debt has improved, but remains one of the weakest among qualified sovereigns, Moody’s said, adding that the CAA1 qualification also reflected the weak governance of the country and the high degree of political uncertainty.
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Aurengzeb told an entrepreneurs in Islamabad before Moody’s’s announcement that he was waiting for an improvement in Pakistan’s credit qualification by other agencies after Fitch and S&P.
“We have hopes of progress in terms of the policy rate that goes south,” he added.
Aurengzeb said it was his personal opinion that there was more space for a tariff cut at the end of the year, and added that it was for the Central Bank to make the final call on the subject.
The next policy rate announcement is due between September 15.
The Central Bank left its key interest rate without 11% changes on July 30, with respect to the expectations of analysts. In a Reuters survey, they had predicted a reduction of 50 to 100 basic points.
The bank said the inflation perspective had deteriorated due to the increase in energy prices.
Inflation accelerated to 4.1% year -on -year in July.
