Fitch upgrades Pakistan's rating to CCC ahead of IMF board meet on $3 billion agreement
Reuters. Pakistan faces some $23 billion of external debt obligations coming due in the fiscal year starting July — more than five times the nation’s foreign-exchange reserves. Fitch in a statement said that the upgrade reflected the country's improved external liquidity and funding conditions following a staff level agreement with the International Monetary Fund (IMF). The credit rating agency however, warned that the fiscal deficit still remained wide.
"We expect the consolidated general government (GG) fiscal deficit to widen to 7.6% of GDP in FY24," the statement read. Meanwhile, Pakistan's budget for FY24 has estimated the fiscal deficit at 6.5% of GDP.
The IMF is scheduled to hold a board level meeting on 12 July with Pakistan. After the meet, the IMF will disburse $1.1 billion to the cash strapped country.
The IMF has said that Pakistan will target primary surplus of 0.4% of GDP. Pakistan secured a badly needed $3 billion stand-by arrangement (SBA) from the International Monetary Fund, giving the South Asian economy a much-awaited respite as it teeters on the brink of default. The IMF will disburse the $ 3 billion over a nine- month period, after the meeting is held on 12 July.
The $3 billion short-term IMF funding is higher than expected as it looks set to replace the remaining $2.5 billion from a $6.5 billion Extended Fund Facility agreed in 2019. Fitch credit rating agency believes that the IMF deal will open opportunities for increased external financing in Pakistan, although warns that this would also mean increased financial deficit. With sky-high inflation and foreign exchange reserves barely enough for a month of controlled imports, analysts say Pakistan's economic crisis could have spiralled into a
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