ISLAMABAD: Fitch Ratings lowered Pakistan's outlook from stable to negative due to weakening liquidity and little external funding since the start of this year, media reported.

Fitch Ratings said in a statement that the change to a negative outlook reflects a material deterioration in Pakistan's external financial position and financing constraints since early 2022,  The News reporetd.
In a challenging economic and political environment, the statement added, "We expect IMF board approval of Pakistan's new staff-level agreement with the IMF, but see major risks to its implementation and to ongoing access to finance following the programme's expiry in June 2023."

The international credit rating agency noted that given the current conditions of slowing economy and high inflation, the authorities' fiscal and external adjustment may be undermined by the return of political turbulence, as it was in early 2022 and 2018.

Fitch stated in its assessment that former prime minister Imran Khan, who was ousted in a no-confidence vote on April 10th, has been calling for early elections and organising massive demonstrations and public gatherings around the nation. But the new government is backed by a splintered alliance of parties that holds a tenuous parliamentary majority. Regular elections are scheduled for October 2023, which raises the possibility of policy reversals when the IMF programme is finished.

The State Bank of Pakistan (SBP) has spent reserves to prevent currency depreciation, which has depleted foreign exchange reserves which provided another rationale for reducing Pakistan's rating, Fitch said.

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