September 4, 2019 (MLN): Moody’s Investor Service has completed its periodic review of issuers where they reiterated that the credit profile of Pakistan (issuer rating B3) reflects the country's “Moderate (+)” economic strength, which is underpinned by the relatively robust GDP growth potential and large scale of the economy.
The document issued following the review further opines that the country’s growth potential is limited by very low per capita incomes and global competitiveness. Other factors that also play a significant role in confining economic growth are, Pakistan’s “Very Low (+)” institutional strength that takes into account very weak scores in the Worldwide Governance Indicators, “Very Low (-)” fiscal strength and; “High” susceptibility to event risk driven by heightened external vulnerability.
Meanwhile, Pakistan’s political and government liquidity risks remain elevated.
According to Moody’s, greater central bank autonomy in the country has increased its monetary policy effectiveness. Moreover, since Pakistan’s narrow revenue base hinders debt affordability, reduces fiscal flexibility and increases the debt burden given ongoing infrastructure spending needs and rising interest expense, its fiscal strength is bound to be very low.
The document further apprises that the review did not involve a rating committee, and this publication is not an indication of whether or not a credit rating action is likely in the near future.
They also added that credit ratings and/or outlook status cannot be changed in a portfolio review and hence are not impacted by this announcement.
