Moody’s Investors Service has found the recent elections held in Pakistan “highly controversial”, casting doubt over the new government’s ability in the wake of the likely formation of a weak government at the Centre in the coming days.
“Political risks are high following a highly controversial general elections held on February 8, 2024,” observed the agency, adding that a coalition government looked set to be formed primarily by Pakistan Muslim League-Nawaz (PML-N) and Pakistan People’s Party (PPP) but there is high uncertainty around the newly elected government’s willingness and ability to quickly negotiate a new International Monetary Fund (IMF) loan programme soon after the current one expires in April 2024.
“The forthcoming coalition government’s electoral mandate may not be sufficiently strong to pursue difficult reforms that will likely be required by a successor programme. Until a new programme is agreed to, Pakistan’s ability to secure loans from other bilateral and multilateral partners will be severely constrained,” Moody’s said.
Moody’s also left Pakistan’s long-term issuer rating unchanged at ‘Caa3’, suggesting the Country is facing high credit risk.
“Pakistan’s ratings, including its Caa3 long-term issuer rating, with stable outlook remain unchanged,” it said.
It said that the Country’s credit profile reflected the government’s “very high liquidity and external vulnerability risks” as the very low levels of foreign exchange reserves remain well below what is required to meet its very high external financing needs over the near to medium term.
“The Country’s very weak fiscal strength and elevated political risks also constrain its credit profile,” it said.
