Moody's Investors Service has upgraded Pakistan's foreign currency issuer and senior unsecured bond ratings to B3 from Caa1, and assigned a stable outlook. Upgrading the ratings, Moody's said the key drivers for the decisions are expectations of continued strengthening of the external payments positions and sustained progress in structural reforms under the government's programme with the International Monetary Fund. "As progress on these fronts becomes firmly entrenched, risks of default are receding relative to other sovereigns in the Caa1-rated category that are facing heightened external vulnerabilities," the Moody's said in a statement.
Concurrently, Moody's has upgraded the rating assigned to the US dollar Trust Certificates issued by The Second Pakistan International Sukuk Company Limited to B3. In Friday's rating action, Moody's also changed Pakistan's foreign-currency bond ceiling to B2 from B3, the foreign-currency deposit ceiling to Caa1 from Caa2, and the local-currency country risk ceiling to Ba3 from B1. The short-term country ceilings for foreign-currency bonds and deposits remained unchanged at Not-Prime (NP).
The agency noted that Pakistan's external liquidity position continued to strengthen. Net foreign reserves had climbed steadily, to $11.9 billion as of end-May 2015 from a low of $3.2 billion in January 2014. "Improvement in external liquidity has recently been bolstered by successful recent privatisation offerings that have been met with strong investor appetite, in turn reinforced by Pakistan's underlying growth potential and progress on structural reforms.
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