Moody’s Investors Service downgraded Pakistan’s local and foreign currency credit rating to Caa3. Earlier, Pakistani currency stood at Caa1. The recent downgrading indicates that the country is at a higher risk of default on foreign debt repayment.
A statement issued by the agency on Tuesday read as “In the current extremely fragile balance of payments situation, disbursements may not be secured in time to avoid a default.” The decision is based on Pakistan’s external position and fragile liquidity “raise default risks to a level consistent with a Caa3 rating.”
The country’s foreign reserves have jumped to “extremely low levels, far lower than necessary to cover its imports needs and external debt obligations over the immediate and medium term.”
This is the second time in four months when the country’s rating is revised due to the decreasing foreign exchange reserves.
As of now, Pakistan has reserves of around $4 billion that can cover import bills for a month only.
The government has taken tough decisions to acquire the IMF Program, however, both the parties have not reached an agreement yet.
