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Moody’s upgrade due to government policies

International ratings agency, the Moody’s on Saturday confirmed Pakistan’s ratings at B3 stable changing its stance from the ‘under review’ for downgrade. 

“Moody’s Investors Service (“Moody’s”) has today confirmed the Government of Pakistan’s B3 local and foreign currency issuer and senior unsecured debt ratings with a stable outlook,” the agency said in a press release. 

“Concurrently, Moody’s has also confirmed the B3 foreign currency senior unsecured ratings for The Third Pakistan International Sukuk Co Ltd. The associated payment obligations are, in Moody’s view, direct obligations of the Government of Pakistan.”

“This concludes the review for downgrade initiated on 14 May 2020,” it added.

Meanwhile, the Ministry of Finance termed the positive review as an affirmation by the ratings agency for the government’s policies and actions. 

“This is an affirmation of the government’s sound fiscal and financial policies in these times of unprecedented hardship and uncertainty,” the finance ministry said in a statement.

Meanwhile, former finance minister Asad Umar tweeted that “In the middle of a global pandemic it’s a testimony to the V-shaped recovery Pakistan has seen with a balanced approach to safeguarding national health & livelihoods, delivering success on both counts.” 

Moody’s had said that the earlier review for downgrade reflected Moody’s assessment that the country’s participation in the G20 Debt Service Suspension Initiative (DSSI) raised the risk that private sector creditors would incur losses. In the last few weeks, 

However, it said it has considered the evidence of implementation of DSSI for a range of rated sovereigns, and statements by G20 officials.

Meanwhile, the press release also added that while Moody’s continues to believe that the ongoing implementation of DSSI poses risks to private creditors, the decision to conclude the review and confirm the rating reflects Moody’s assessment that, at this stage, for Pakistan, those risks are adequately reflected in the current B3 rating. 

It remains unclear what influence is being applied to Pakistan and to other participating sovereigns to treat private creditors in a comparable manner to official sector creditors, it added.

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