S&P World Rankings on Thursday upgraded Pakistan’s sovereign credit standing to ‘B-‘ from ‘CCC+’ with a secure outlook, citing improved funds and international trade reserves following the IMF bailout. Nonetheless, the worldwide score company warned that escalating border tensions with India might materially worsen Pakistan’s credit score threat.
“Official support and up to date enhancements to its balance-of-payments place have boosted Pakistan’s international trade reserves, thus assuaging stress on exterior metrics. Although debt-servicing prices stay hefty, the federal government’s efforts to broaden income and extra benign inflation are hastening the tempo of fiscal consolidation,” it mentioned in an announcement.
The secure outlook displays expectations that exterior assist to Pakistan from key multilateral and bilateral companions, alongside the strengthening of its fiscal place, will persist over the subsequent 12 months to fulfill its appreciable debt obligations, the company famous.
It added that scores may very well be downgraded if Pakistan’s exterior or fiscal indicators deteriorate considerably. Conversely, the scores could also be raised if institutional and political settings enhance, resulting in entrenched financial reforms, sustained development, and stronger fiscal consolidation.
S&P mentioned it expects political uncertainty to stay excessive on account of Pakistan’s fractious political setting.
“The scores on Pakistan stay constrained by elevated home and exterior safety dangers,” the company added. Whereas the nation’s safety state of affairs has improved for the reason that early 2010s, the potential for deterioration stays.
“Border tensions with India, as evident within the current outbreak of hostilities following the Pahalgam terrorist assault in Could 2025, can elevate the specter of miscalculations and unintentional clashes that might escalate nicely past the intentions of each side,” it warned, including that such a state of affairs would materially worsen Pakistan’s credit score profile.
The IMF’s Prolonged Fund Facility (EFF) and Resilience and Sustainability Facility run concurrently over 37 months, giving Pakistan a mixed assist package deal of $8.4 billion.
S&P World had in Could warned that hostilities between India and Pakistan heighten credit score dangers for each international locations, and any escalation might put downward stress on their sovereign scores. India had launched Operation Sindoor on the time, following the killing of 26 civilians within the Pahalgam assault.
