Pakistan Retains Stable Rating

Moody’s Investors Service said that Pakistan’s (B3 stable) credit profile is supported by the country’s robust growth performance and potential, a large—but low-income—economy, and an improved track record of reforms that started under its 2013-16 International Monetary Fund program, APP reported. These strengths have been accompanied by greater transparency and lower levels of inflation and inflation volatility, the report added. “Moody’s continues to expect solid economic activity, driven by investments related to the China-Pakistan Economic Corridor.” Moody’s said: Credit challenges include the country’s high general government debt burden and low debt affordability, weak physical and social infrastructure weighing on economic competitiveness, an increasingly vulnerable external payments position, and high political risk. In particular, the government’s very narrow revenue base restricts fiscal flexibility and weighs on debt affordability. The moderate but rising level of external government debt also exposes the country’s finances to sharp currency depreciations. In addition, the high level of imports—largely because of CPEC—continues to exert pressure on the external account.