Global credit rating agency Moody’s has downgraded Pakistan’s local and foreign currency credit ratings. The agency has dropped the rating two notches down to Caa3 from Caa1. The increase in default risk due to mounting international loans and a crumbling economy were the contributing factors to the new rating which is the lowest in three decades.
“The decision to downgrade the ratings is driven by Moody’s assessment that Pakistan’s increasingly fragile liquidity and external position significantly raises default risks to a level consistent with a Caa3 rating,” the agency said.
The rating is expected to hurt the position of the Pakistani government which is currently involved in talks with the International Monetary Fund (IMF) to secure a $1 billion bailout package.
“Significant external financing becoming available in the very near term, such as through the disbursement of the next tranches under the current IMF programme and related financing, would reduce default risk potentially to a level consistent with a higher rating,” read the report.
The agency, however, warned that getting the package may not be enough for the country to resuscitate its fortunes. Weak governance and heightened social risks can impede Islamabad’s capability to chart a turnaround in fortunes.
To secure IMF funding, the Pakistani government has implemented new tax measures as suggested by the global body. however, securing the final tranche of payment looks like an unlikely proposition in the immediate future.
In the face of the ongoing financial crisis, where foreign reserves have fallen to historic low levels, the Pakistani government has come up with some measures to save energy and reduce its energy bill.
Markets and restaurants are reportedly closing at 8:30 PM and 10 PM in a bid to save energy. The decision was announced in January with the government aiming to save $274 million through it. However, it has drawn flak from both market associations as well as the general masses.
(With inputs from agencies)
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