ISLAMABAD: Fitch Ratings, a US-based global rating agency, has downgraded Pakistan's long-term foreign-currency issuer default rating (IDR) to CCC+ from B-, it said on Friday, as the South Asian country continues to face worsening liquidity and fiscal policy risks.
Concerns have risen in recent weeks about Pakistan’s ability to raise finances to meet external financing requirements to deal with the floods that have killed 1,700 people and inflicted $30 billion in damages to the economy.
Pakistan’s ability to tap the international market has been affected by its bonds taking a battering in the secondary market and a ratings downgrade by Moody’s earlier this month, while Fitch and S&P Global earlier downgraded the country’s outlook.
Fitch, one of the 'Big Three' credit rating agencies along with Moody's and Standard & Poor's, does not assign outlooks to countries with a rating of CCC+ or below.
"The downgrade reflects further deterioration in Pakistan's external liquidity and funding conditions, and the decline of foreign-exchange (FX) reserves. This is partly a result of widespread floods, which will undermine Pakistan's efforts to rein in twin fiscal and current account deficits," Fitch said.
"The downgrade also reflects our view of increased risks of policies potentially undermining Pakistan's IMF programme and official financial support."
The International Monetary Fund (IMF) in late August released $1.1 billion to Pakistan as part of a $6 billion package sealed in 2019 as the new government of Prime Minister Shehbaz Sharif moved forward on reforms.
Pakistan's liquid foreign exchange reserves stood at $7.6 billion, or about a month of current external payments, by October 14, according to the State Bank of Pakistan (SBP).
However, SBP Governor Jameel Ahmad this month said there was “no question” about Pakistan not meeting debt repayment obligations, and financing requirements continued to be fully met.
He said Pakistan had already made $4.6 billion in debt payments this fiscal year and would make the $1 billion bond repayment in full in early December.
