On Wednesday, Fitch’s global rating agency maintained Pakistan’s long-term foreign currency issuer default rating at ‘CCC’. It noted that it expects general elections to occur as scheduled and produce a coalition government “along the lines of Shehbaz Sharif’s government”.
The unchanged credit rating is based on last month’s IMF staff-level agreement on the first review of Pakistan’s nine-month standby arrangement (SBA).
But US-based Fitch Ratings — one of three leading global rating agencies — expressed concern over the uncertainties surrounding the upcoming elections and the potential for ensuing political volatility, which could impact the implementation of structural reforms and pose economic challenges.
Fitch had previously downgraded Pakistan’s rating from ‘CCC+’ in October 2022 to ‘CCC-’ in February 2023 before upgrading to ‘CCC’ in July.
Says delay in elections may jeopardise IMF negotiations
On Wednesday, the rating agency saw high but easing external risks. It said the ‘CCC’ rating reflects high external funding risks amid high medium-term financing requirements, despite some stabilisation and Pakistan’s strong performance on its current SBA with the IMF staff.
“We expect elections to take place as scheduled in February and a follow-up IMF programme to be negotiated quickly after the SBA finishes in March 2024, but there is still the risk of delays and uncertainty around Pakistan’s ability to do this,” Fitch said in a statement, adding that the “elections could endanger the durability of recent reforms and leave room for renewed political volatility”.
