Pakistan’s credit rating to be revised once IMF Board approves loan: Moody’s

International ratings agency Moody’s Corporation has said that Pakistan’s credit rating will improve once the International Monetary Fund’s (IMF) Executive Board approves the new loan of $7 billion.

Moody’s analyses companies, governments, and their securities and assigns them a credit rating that investors can use.

The highest rating is Aaa, which means the securities pose the lowest risk.

The lowest rating is C, which is reserved for securities already in default and where the chance of recovering the invested amount is little.

Pakistan’s current credit rating is Caa3 (stable).

This rating would improve after the new IMF programme was approved, which was likely, it said.

The new programme would not only provide a credible source of funding from the international lender but also unlock loans from other multilateral and bilateral lenders.

However, the financing’s continuation depends on the Pakistan government’s ability to sustain tough reforms, including widening the tax base and removing exemptions, and increasing energy tariffs.

These reforms could lead to a resurgence in social unrest as the cost of living rises due to higher taxes and increased energy tariffs.

Moreover, there was a risk that Pakistan’s coalition government might not have a strong enough electoral mandate to continually push through difficult reforms, Moody’s noted.

“Pakistan’s external position remains fragile, with high external financing requirements over the next three to five years. The country is vulnerable to policy slippages,” it added.