Moody's upgrades Pakistan's credit rating on improved external, fiscal position

ISLAMABAD, Aug. 14 (Xinhua) -- Moody's Ratings on Wednesday upgraded Pakistan's local and foreign currency issuer and senior unsecured debt ratings to Caa1 from Caa2, citing improvements in the country's external and fiscal positions.

In a statement, the rating agency said the stable outlook reflects balanced risks to Pakistan's credit profile, with progress under the International Monetary Fund's Extended Fund Facility program supporting the build-up of foreign exchange reserves and expansion of the tax base.

Moody's noted that the sovereign's fiscal position is also strengthening from very weak levels, aided by an expanding tax base. Debt affordability has improved, but remains among the weakest of all rated sovereigns.

The stable outlook reflects balanced risks to the country's credit profile. On the upside, debt service burden and external profile improvements could materialize faster than anticipated, while on the downside, delays in reform implementation necessary for securing official financing could erode recent external gains, the agency added.

The upgrade also applies to the backed foreign currency senior unsecured ratings for The Pakistan Global Sukuk Programme Co. Ltd., whose associated payment obligations are considered direct obligations of the government. The outlook for the program has likewise been revised to stable from positive, in line with the sovereign outlook.

Moody's further raised Pakistan's local and foreign currency country ceilings to B2 and Caa1 from B3 and Caa2, respectively, citing the government's large role in the economy, incomplete capital account convertibility, and the possibility of transfer and convertibility restrictions.

The country's Prime Minister, Shehbaz Sharif, welcomed the upgrade, expressing satisfaction over the development and appreciation for his economic team's efforts, the Prime Minister's office said.

Sharif said the government was committed to further improving the rating as a reflection of its economic policies moving in the right direction.