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S&P Global Ratings downgrades Pakistan’s credit score

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2 years ago

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  • S&P decreases Pakistan’s credit score from B- to CCC+.
  • Agency maintains Pakistan’s outlook stable.
  • Fitch and Moody’s have already ranked Pakistan’s bonds below investment grade.

KARACHI: S&P Global Ratings has downgraded Pakistan’s credit score due to the series of shocks — from flooding to surging inflation — that has deteriorated the country’s external, fiscal and economic metrics, reported The News.

The nation’s credit score was downgraded from B- to CCC+ by S&P, which expects Pakistan’s dwindling foreign reserves to remain under pressure in the coming year, just as political risks linger, according to a statement.

“Pakistan’s already low foreign exchange reserves will remain under pressure throughout 2023, barring a material decline in oil prices or a step-up in foreign assistance,” S&P analysts Andrew Wood and YeeFarn Phua wrote.

The country also faces elevated political risks which may affect its policy trajectory over the next year.

Fitch Ratings and Moody’s Investors Service already rank the nation’s $7.8 billion in foreign bonds at seven notches below investment grade, the equivalent of S&P’s CCC+ rating, on par with El Salvador and Ukraine. S&P also raised the outlook for Pakistan to stable from negative on Thursday.

The country is facing an economic crisis with only enough reserves to cover one month of imports, a dollar shortage and a delay in its loan programme with the International Monetary Fund. Investors are pessimistic about Pakistan’s ability to keep up with its foreign debt obligations, with long-term dollar bonds continuing to trade at distressed levels despite the payment of a $1 billion bond this month.

S&P said this year’s severe floods, surging food and energy inflation, as well as rising global interest rates, will further depress Pakistan’s economic and fiscal outcomes, with refinancing challenges over the medium term.

Pakistan’s unprecedented floods in the summer killed more than 1,700 people, inundated a third of the nation and cut the nation’s growth by half. The floods have left about $32 billion in damages and losses to the nation’s economy.

Meantime, the current administration is set to end by August of next year or earlier, meaning it has limited time to implement economic reforms.

“We expect political uncertainty to remain elevated over the coming quarters, with continued pressure from the opposition to hold early elections,” the S&P analysts wrote.

The agency maintained its outlook at “stable”.

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Robust activity lets PSX climb above 115,000 level again.

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On Friday, the Pakistan Stock Exchange (PSX) resumed its upward trend, crossing 115,000 points once more.

The PSX had strong action in the morning session, as the KSE-100 index increased by 1,000 points to 115,138.

The notoriously volatile PSX closed Thursday at 114,037 points, up 594 points.

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Meanwhile, in the interbank market this morning, the US dollar fell 7 paisas to Rs278.65 against the Pakistani rupee.

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SBP will announce monetary policy on January 27.

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The State Bank of Pakistan (SBP) will release its monetary policy on Monday.

The Monetary Policy Committee (MPC) of the SBP will convene on the first day of the following week to make decisions on monetary policy.

The Monetary Policy decision will be announced by Governor SBP Jameel Ahmad at a news conference on the same day after the MPC meeting, according to an official release.

In December, the central bank reduced policy rates by 200 basis points (bps) to 13 percent.

“In November 2024, headline inflation fell to 4.9 percent year on year, meeting the MPC’s estimates. This decrease was mostly caused by the ongoing decline in food inflation and the phasing out of the impact of the gas tariff increase in November 2023,” SBP stated in an official release.

“However, the Committee noted that core inflation, at 9.7 percent, is proving to be sticky, while consumer and business inflation expectations remain volatile.” To that end, the Committee restated its previous assessment that inflation may remain volatile in the short term before stabilizing within the target range.

“At the same time, growth prospects have slightly improved, as evidenced by a recent increase in high-frequency indicators of economic activity.” Overall, the Committee concluded that its approach of gradual policy rate decreases is keeping inflationary and external account pressures under control while promoting long-term economic growth.

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Finance Minister Meets With World Leaders at World Economic Forum in Davos

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During his attendance at the World Economic Forum in Davos, Switzerland, Finance Minister Muhammad Aurangzeb has met with officials of organisations and leaders of many nations.
Bangladesh’s Chief Advisor, Muhammad Younas, met with Mohammad Aurangzeb.
On the fringes of the World Economic Forum’s Annual Meeting 2025 Opening Banquet, there was an informal meeting.
Additionally, the Finance Minister met with Anwar Ibrahim, the Prime Minister of Malaysia.
Both leaders discussed economic cooperation and bilateral ties.
Muhammad Aurangzeb also had a meeting with Dp World’s Rizwan Soomro and Yuvraj Narayan.
They talked about how to strengthen Pakistan’s logistics and infrastructure systems to support trade.
“The Pakistani government is committed to advancing joint projects and values partnerships in both business-to-business and business-to-government cooperation,” the finance minister added.

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