Islamabad: The international rating agency Standard & Poor’s has deemed political instability and unrest as dangerous for the economy and has maintained Pakistan’s long-term credit rating at Triple C Plus.
According to the ongoing S&P report on Pakistan’s economy, the long-term outlook for Pakistan’s rating is stable, and there has been improvement in Pakistan’s economic situation over the past year.
The risks of Pakistan defaulting in the near future have decreased.
The report states that Pakistan will receive funds under a new $7 billion loan program from the IMF, and there is a possibility of loan rollovers with Saudi Arabia, UAE, and China, which will help Pakistan meet its external financial needs for the next six to 12 months.
However, political uncertainty may affect economic performance and policy-making.
The rating agency notes that Pakistan faces high inflation and tight financial conditions. Over 50% of the government’s revenue this fiscal year will be used for debt payments.
Despite an increase in foreign exchange reserves, they remain low, and the rating may improve if reserves increase and the financial situation improves.
The report predicts that economic growth this fiscal year will be about 3.5%, with per capita income remaining below $1,700 until 2026.
Due to financial pressures, the government may face an increase in interest burden.
Pakistan has the highest interest payment rates globally, and the government is renegotiating loan terms with IPPs, which may reduce the debt burden on Pakistan.
The report also highlights that efforts towards financial stability will be hampered by high inflation, and political unrest may perpetuate uncertainty, potentially affecting the implementation of necessary reforms under the IMF program.
Possible border tensions with India and Afghanistan could also impact the economy.