Moody’s Investors Service has assigned a definitive rating of B3 to Pakistan’s global bond offering.
“The outlook is stable” said a Moody statement issued on Friday.
Moody’s definitive ratings for these debt obligations confirm the provisional ratings assigned on September 18, 2015.
The Moody statement said that Pakistan’s B3 issuer rating reflects moderate economic strength with a supply-constrained economy that has been resistant to structural change, Moody’s reported.
Although the scale of the economy is relatively large, globally, Pakistan’s per-capita income level is relatively very low.
Implementation of the China-Pakistan Economic Corridor (CPEC) will over time, bolster growth through investment in transportation and power generation infrastructure, the statement said.
However, the government has gained significant traction on reforms under the IMF (International Monetary Fund) programme, key goals of which include deficit reduction, resolving constraints in the energy sector, and the privatisation of several state-owned enterprises.
Government’s debt roll over risk is also reduced by sizeable recourse to domestic bank lending and, to some degree, by a debt structure which consists of long-tenor credits from multilateral and official bilateral creditors, the Moody’s statement said.
The statement further added that the challenging operating environment, susceptibility to economic risks and political shocks, coupled with a high concentration to the sovereign, links the health of the banking system very closely to that of the government.
Upward pressures stem from support from multilateral and bilateral lenders, which bolster an improving foreign reserve position and ongoing reform progress. Deeply entrenched weaknesses in the power sector also acts as a bottleneck to growth.
While Pakistan’s government financing is mainly from domestic sources and system-wide external debt is declining as a percent to GDP (Gross Domestic Product), the level of external public debt poses a moderate degree of credit risk.
