New York July 28 2022: S&P Global Ratings cut Pakistan’s credit outlook to negative from neutral as the nation’s external position weakens with higher commodity prices, the rupee’s depreciation and tighter global financial conditions.
The nation could be downgraded if support from bilateral and multilateral lenders quickly erodes or if usable foreign-exchange reserves fall further, S&P said in a statement Thursday. The company also affirmed the nation’s rating at B-, on par with Ecuador and Angola.
The Pakistani rupee has lost more than 30% of its value versus the dollar this year and the country’s dollar debt has reached record lows as it stares down to a $1 billion bond payment in December. The nation is striving to stave off fearsit will follow Sri Lanka into a default this year with the government working to secure billions of dollars from the International Monetary Fund and countries like China and Saudi Arabia.
“The Pakistan government has considerable external indebtedness and liquidity needs, and an elevated general government fiscal deficit and debt stock,” analysts including Andrew Wood wrote in the statement. “Although the impact of these more difficult macroeconomic conditions has been partially mitigated by various reform initiatives undertaken by the government over the past few years, the risk of continued deterioration in key metrics, including external liquidity, is rising.”
Moody’s Investors Service and Fitch Ratings already have a negative outlook on the country. The three companies rate Pakistan deep into junk.