SINGAPORE: S&P Global Ratings downgraded Pakistan's credit outlook from neutral to negative as the country's external situation deteriorates due to increased commodity prices, rupee depreciation, and tighter global financial conditions.
Pakistan might be downgraded if assistance from bilateral and multilateral lenders erodes swiftly or if usable foreign-exchange reserves decrease more, according to The News, citing S&P in a statement. The company also confirmed the country's rating of B-, which puts it on level with Ecuador and Angola.
The Pakistani rupee has lost more than 30% of its value against the dollar this year, and the country's dollar debt has reached new lows as it prepares to make a $1 billion bond payment in December.
The administration is seeking to secure billions of dollars from the International Monetary Fund and countries such as China and Saudi Arabia in order to avoid a default this year, according to The News. "The Pakistan government has significant foreign indebtedness and liquidity demands, as well as an elevated general government fiscal deficit and debt stock," analysts such as Andrew Wood noted in a statement.
"Although the impact of these more difficult macroeconomic conditions has been largely reduced by different government reform initiatives undertaken in recent years, the danger of ongoing deterioration in key indices, notably external liquidity, is rising." Moody's Investors Service and Fitch Ratings have already assigned the country a negative outlook.
Pakistan is rated as junk by all three companies. On the list of unfortunate economies that markets think might soon follow SriLanka into debt default and economic crisis, Pakistan sits near the top, The News reported.
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