Moody's Investors Services on Thursday maintained Pakistan's B3 rating which reflects a gradual stabilisation of its economic and financial strength at low levels. Aninda Mitra, Moody's sovereign analyst for Pakistan in his analysis said the country's growth downturn is bottoming out, and its near-term external liquidity has improved.
Authorities have implemented measures to reduce imbalances in the economy, and a strong trend in remittances from overseas Pakistanis is also supporting the country's external position. The rating also reflects the entrenched nature of supply-side constraints and low savings, narrow tax revenues and relatively weak external competitiveness.
These drawbacks are reinforced by poor governance, slow policy and administrative reforms, as well as delays in much-needed external assistance. The report said: "Although constitutional order is being restored, Pakistani politics remain fractious and polarised. Ongoing delays in the implementation of important structural, policy, and administrative reforms reflect the fears of ensconced, vested interest groups at the cost of broad and sustained gains for the economy as a whole."
The government has toughened its security response against religious extremists. Nonetheless, the ongoing counter-insurgency and a high-level of domestic violence, coupled with uncertainty about the durability of medium-term growth, subjects the sovereign rating to sizeable event risk.
The stable outlook reflects augmentation of the IMF programme, which will alleviate external financing needs over the next 15 months and bridge near-term shortfalls in fiscal financing. Even though confidence-sensitive foreign private investment may remain volatile, the stable outlook is supported by recent improvements in monetary confidence and stabilisation of macroeconomic imbalances.
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