Moody’s downgrades Pakistan’s outlook from stable to negative

Moody's Investors Service, one of the world’s top three credit rating agencies on Thursday downgraded Pakistan’s outlook from stable to negative

However, it affirmed the ‘B3’ local and foreign currency long-term issuer and senior unsecured debt ratings.

The decision to change the outlook to negative is driven by Pakistan's heightened external vulnerability risk and uncertainty around the sovereign's ability to secure additional external financing to meet its needs, the rating agency said in its report.

Moody's assessed that Pakistan's external vulnerability risk has been amplified by rising inflation, “which puts downward pressure on the current account, the currency and – already thin – foreign exchange reserves, especially in the context of heightened political and social risk”.

Pakistan's weak institutions and governance strength add uncertainty around the future direction of macroeconomic policy, including whether the country will complete the current IMF Extended Fund Facility (EFF) programme and maintain a credible policy path that supports further financing.