January 18, 2022 (MLN): Moody's Investors Service (Moody's) has assigned a B3 backed senior unsecured rating to the proposed US dollar-denominated trust certificates (Sukuk) issuance by the government of Pakistan through the Pakistan Global Sukuk Programme Company Limited, a special purpose vehicle, which is wholly-owned by the govt and whose debt and trust certificate issuances are, in Moody's view, ultimately the obligation of the country, said a press release issued today.
The assigned rating to the Sukuk mirrors Pakistan's current issuer rating. According to the terms and conditions available to Moody, the trust certificates will constitute direct, unconditional, and unsubordinated obligations of the country.
In Moody's opinion, the payment obligations represented by the securities to be issued by the company rank pari passu with all of the country's current and future senior unsecured external debt.
Proceeds from the Sukuk issuance will be used by the company to purchase assets from the National Highway Authority. The amounts subsequently received by Pakistan in consideration for the transaction will be used for general budgetary purposes.
With regards to ratings rationale, Pakistan's B3 issuer rating is underpinned by its relatively large economy and robust long-term growth potential, as well as ongoing reforms that may strengthen policy effectiveness over time. Credit challenges include structural constraints to export competitiveness, the government's high debt burden and a narrow revenue base that reduces fiscal flexibility and weakens debt affordability, as well as political risks that can influence the reform trajectory.
