Islamabad, Nov 24 (EFE).- International credit rating agency Fitch has affirmed that Pakistan’s policy adjustments and access to external financing could create positive momentum for the debt of the country.
The agency had predicted a “stable outlook” in May 2021 for Pakistan’s debt.
“Ongoing reforms, if sustained, could create positive momentum for the sovereign’s ‘B-’ rating,” Fitch said in a report.
It noted that Saudi Arabian had supported Pakistan’s near-term financing efforts to place $3 billion on deposit with the State Bank of Pakistan.
The kingdom would provide an additional $1.2 billion oil-financing facility under a one-year support package.
Pakistan’s foreign reserves also received a $2.8 billion boost in August from the IMF’s one-off global allocation of Special Drawing Rights.
On Nov.21, the IMF and Pakistan reached a consensus on the $6 billion financial assistance agreement of 2019. Fitch expects the fund to release $1 billion from the pact.
It is the third financial program that the IMF grants to the Asian nation.
“If the government retains its commitment to a market-driven exchange rate, we believe this would be a useful shock absorber to help contain external risks in the longer term,” it said.
An exchange rate that supports the price competitiveness of Pakistan’s exports could over time help to reduce the country’s reliance on debt financing to balance its external accounts, which remains a credit weakness.
In addition, fiscal consolidation under the EFF could help reduce external imbalances by dampening imports, while also reducing the drag of weak public finances on Pakistan’s rating.
The situation is a repetition of the previous elections of 2013, when two months after the inauguration of the new government the IMF announced a package of aid of $5.3 billion to reactivate its weakened economy.
Pakistan finished repaying that aid package in October last year, the first time that the country had fully repaid an IMF loan. EFE