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    Fitch Ratings Downgrades Pakistan’s Long-term Foreign Currency IDR to ‘CCC-‘ Amid Rising Risks


    Fitch, a global rating agency, has reduced Pakistan's long-term foreign currency issuer default rating (IDR) from ‘CCC+' to ‘CCC-‘ on Tuesday. This downgrade was caused by the decrease in liquidity and policy risks, as well as the strain on foreign exchange reserves.

    Fitch Ratings has downgraded Pakistan’s long-term foreign currency issuer default rating (IDR) to ‘CCC-’, from ‘CCC+’ due to worsening liquidity, political volatility and decline of foreign-exchange reserves to critically low levels.

    Fitch has warned that default or debt restructuring is becoming more and more likely.[0]

    Fitch stated that the downgrade was due to a substantial decline in external liquidity and funding sources, alongside a decrease in foreign exchange reserves to an “extremely low” level.[1]

    “Falling reserves reflect large, albeit declining, current account deficits (CADs), external debt servicing, and earlier FX intervention by the central bank, particularly in 4Q22, when an informal exchange-rate cap appears to have been in place.”[2]

    Shortfalls in revenue collection, energy subsidies and policies inconsistent with a market-determined exchange rate have held up the 9th review of Pakistan’s IMF programme, which was originally due in November 2022.[3]

    Fitch noted that it has been difficult to get financial support from China, Saudi Arabia, and the United Arab Emirates, as they have been hesitant to offer assistance without an IMF program in place. This is a key factor for other multilateral and bilateral funding sources as well.[3]

    It has been reported that there are backlogs of unpaid imports in Pakistan's ports, which may lead to an increase in the Current Account Deficit (CAD) once additional funding is made available.[2]

    For FY23, $7 billion remain. It is estimated that $3 billion of this is from deposits from China (SAFE) that will likely be rolled over, and $1.7 billion are loans from Chinese commercial banks that Fitch anticipates will be refinanced soon.[4]

    The IMF’s conditions are likely to prove socially and politically difficult amid a sharp economic slowdown, high inflation, and the devastation wrought by widespread floods last year, the rating agency said.

    In addition to highlighting Fitch, the rating downgrade was attributed to strenuous IMF conditions, a troublesome political atmosphere, and the necessity of the IMF program in order to acquire funding.

    The Current Account Deficit (CAD) of Pakistan was $3.7 billion in the first half[2]

    0. “Fitch downgrades Pakistani currency's IDR to CCC- – Business” Dunya News, 14 Feb. 2023,

    1. “Fitch Downgrades Pakistan's Rating, Warns Default A ‘Real Possibility'” NDTV, 14 Feb. 2023,

    2. “Fitch downgrades Pakistan’s troubled economy to “-CCC”” SAMAA English, 14 Feb. 2023,

    3. “Fitch downgrades Pakistan's currency issuer default rating to CCC-” Geo News, 14 Feb. 2023,

    4. “Fitch downgrades Pakistan's rating, says default a real possibility” msnNOW, 14 Feb. 2023,

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