ISLAMABAD: Global ratings agency Fitch on Monday affirmed Pakistan’s foreign-currency credit rating at ‘B-’ with a stable outlook, citing progress on fiscal consolidation and improved foreign exchange reserves.
The rating agency said Pakistan’s adherence to its International Monetary Fund program has supported the country’s funding capacity, while rebuilt foreign exchange buffers provide a cushion against economic shocks from the Middle East conflict.
Fitch, however, warned that Pakistan’s high exposure to energy price shocks from an escalating crisis in the Middle East remains a key risk, saying that rising costs and potential supply disruptions could sharply erode the country’s foreign exchange reserves.
“We expect the overall impact on the fiscal deficit to be contained, as the government is likely to cut other spending,” Fitch said, but warned that higher global energy prices will push inflation for fiscal 2026, well above prior year levels.
Pakistan imports oil mainly from Saudi Arabia and the UAE through the Strait of Hormuz, making it particularly vulnerable to price hikes and supply chain disruptions in the Gulf region due to the United States-Israeli war on Iran.
The South Asian country has also led a diplomatic push to mediate the crisis, but last week’s US-Iran talks in Islamabad failed to produce a deal.
Pakistan’s stock market also plunged more than 6,500 points, with analysts attributing it to escalating Middle East tensions and growing economic uncertainty.
The benchmark KSE-100 index fell 3.95 percent or 6,600.04 points to close at 160,591.33 points on Monday, down from the previous close of 167,191.37 points.
“Stocks witnessed selloff amid rising tensions over Middle East conflict,” Ahsan Mehanti, Chief Executive Officer at Arif Habib Commodities, told Arab News.
“Investor fears over inflation, economic uncertainty after US Crude reached $105/b.”
Oil prices climbed back above $100 per barrel on Monday as the US Navy prepared to block ships to and from Iran via the Strait of Hormuz, according to Reuters. Brent crude futures were at $102.23 a barrel by 0810 GMT, and US West Texas Intermediate traded at $103.88.
Sana Tawfik, Head of Research at Arif Habib Limited, said the market declined amid heightened geopolitical tensions.
The failure of US–Iran talks and the US naval move to restrict Iranian shipping via the Strait of Hormuz sparked fears of surging oil prices and economic instability, triggering “widespread panic selling at the PSX,” she told Arab News.
— With input from AFP.
