Mooday’s has lowered the credit rating of Pakistan by one level. The new credit rating is B3. Moody’s has warned that it may cut credit rating further in near future. The negative outlook on Pakistan’s credit rating is mainly due to rapidly deteriorating external liquidity position of the country. The situaion is compounded by lack of economic reforms and political turmoil in the country.
Foreign currency reserves of Pakistan are constantly declining and steps taken by government to check have not shown any positive results. Pakistan desparately needs financial assistance within next few days in order to avoid a default on its external payments. It has appealed to “friendly countries” to come to help, but so far we have not seen any committment from any country. It seems that Pakistan will have no option but to go to IMF for emergency help.
It was expected that Pakistan will be able to get timely help from “friendly countries” like Saudi Arabia, US, China but the delays have eroded the confidence of investors and has resulted in significant “drawdown of Pakistan’s foreign currency reserves”. In a significant move World Bank has cancelled a loan of $300mn dollars which has also complicated problems for the country.
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