After seven years, Moody’s Investors Service (Moody’s) Thursday lowered the Government of Pakistan’s senior unsecured debt rating from B3 to Caa1 for both local and foreign currency issuers. The old unsecured Medium Term Note (MTN) program’s rating has also been reduced by Moody’s, moving from (P) B3 to (P) Caa1. The outlook is still bleak, but it should be noted.
According to a statement from the international organization, “The floods have worsened Pakistan’s liquidity and external credit weaknesses and greatly increased social spending needs, while government revenue is severely hit.”
The rating agency predicted that Pakistan’s long-standing credit weakness, its ability to pay its debts, “will remain extremely weak for the foreseeable future.”
“The Caa1 rating reflects Moody’s view that Pakistan will remain highly dependent on financing from multilateral partners and other official sector creditors to meet its debt payments, in the absence of access to market financing at reasonable costs,” it said. “Moody’s expects in particular that Pakistan’s IMF Extended Fund Facility (EFF) program would continue to operate and offer a pathway for funding from the IMF and other multilateral and bilateral partners in the short future.