The credit profile of Pakistan (issuer rating B3) reflects the country’s “baa2” economic strength, which is underpinned by the robust long-term GDP growth potential and large scale of the economy, balanced against low per capita incomes and global competitiveness, says Moody’s Investors Service (Moody’s).
Moody’s has completed the periodic review of a group of issuers that includes Pakistan and may include related ratings through a discussion held on 17 May 2021. The review did not involve a rating committee, and this publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future; credit ratings and/or outlook status cannot be changed in a portfolio review and hence are not impacted by this announcement.
Moody’s reviews all of its ratings periodically in accordance with regulations — either annually or, in the case of governments and certain EU-based supranational organizations, semi-annually. This periodic review is unrelated to the requirement to specific calendar dates on which EU and certain other sovereign and sub-sovereign rating actions may take place.
Moody’s conducts these periodic reviews through portfolio reviews in which it reassesses the appropriateness of each outstanding rating in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers.
Moody’s stated that the credit profile of Pakistan (issuer rating B3) reflects the country’s “baa2” economic strength, which is underpinned by the robust long-term GDP growth potential and large scale of the economy, balanced against low per capita incomes and global competitiveness; its “b2” institutions and governance strength that balances still weak executive institutions and fiscal policy credibility and effectiveness against a lengthening track record of effective checks and balances and judicial independence, as well as increasing monetary and macroprudential policy effectiveness; the government’s “ca” fiscal strength driven by its high government debt burden and narrow revenue base which hinders debt affordability and reduces fiscal flexibility given ongoing infrastructure and social spending needs; and its “b” susceptibility to event risk driven by external vulnerability, as foreign-exchange reserve adequacy, though improving, remains low compared to peers.
This document summarizes Moody’s view as of the publication date and will not be updated until the next periodic review announcement, which will incorporate material changes in credit circumstances (if any) during the intervening period, it added.
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