The new coalition government formed in Pakistan seems to have insufficient mandate to make tough decisions
Dr. Akhtar Gulfam
LONDON: Moody’s, one of the world’s three major global rating agencies, said it had completed its review of Pakistan’s rating last week, but Moody’s has not announced any credit rating action or any soon. No indication of credit rating action. Moody’s said that Pakistan’s rating, including the ‘CAA 3’ long-term rating, has been maintained with a stable outlook. The sovereign credit rating was downgraded by 2 notches to CAA 3, citing rising specific risks of default. Global rating agency Moody’s maintained Pakistan’s rating at ‘CAA 3’ with a stable outlook. It highlighted liquidity risks and challenges on the external front due to highly contested elections and the limited decision-making capacity of the expected coalition government. The agency observed that political risks are high after the general elections on February 8, 2024, for tough decisions. The new coalition government formed in Pakistan seems to have an insufficient mandate. He added that it appears that the Muslim League (N) and the PPP are ready to form a coalition government together, but the new program of the newly elected government will soon expire after the current loan program with the International Monetary Fund (IMF) expires in April. There is much uncertainty about the willingness and ability to negotiate quickly. The country’s credit profile reflects the government’s ‘excess liquidity and external vulnerability risks’, as low foreign exchange reserves mean high external financing in the medium term. The country’s weak fiscal strength and political risks also constrain the credit profile, according to Moody’s. Otherwise, as required by the new IMF program, Pakistan’s ability to access loans with other bilateral and multilateral partners will be significantly limited until a new loan program is agreed upon.
