S&P Global Ratings has downgraded Pakistan’s credit rating in the wake of its quickly depleting foreign exchange reserves – which are close to hitting a nine-year low at $6.11 billion on Thursday.

“S&P also raised the outlook for Pakistan to stable from negative,” reported Bloomberg, citing a statement from S&P.

“The nation’s credit score was cut by a notch to CCC+ from B- by S&P, which expects Pakistan’s dwindling foreign reserves to remain under pressure in the coming year, just as political risks linger.”

In its latest weekly update on Thursday, the State Bank of Pakistan (SBP) reported that the country’s foreign exchange reserves have depleted to $6.11 billion.

“During the week ended on December 16, 2022, SBP’s reserves decreased by $584 million to $6,116.2 million due to external debt repayment,” said the central bank.

Research houses said the reserves have hit their lowest level since April 2014, meaning they have depleted to an eight-year and nine-month low since then. The current reserves are hardly enough to facilitate five-week worth of imports for the country, compared to a minimum requirement of three-month.

Topline Securities CEO Muhammad Sohail said, “After Fitch and Moody’s, S&P lowers Pakistan rating by one notch to ‘CCC+/C’ on external risk as expected.”

The global news agency added that “Pakistan was downgraded by S&P Global Ratings as a series of shocks — from flooding to surging inflation — cause the nation’s external, fiscal and economic metrics to further deteriorate.”

Fitch Ratings and Moody’s Investors Service already rank the nation’s $7.8 billion in foreign bonds at seven notches below investment grade, the equivalent of S&P’s CCC+ rating, on par with El Salvador and Ukraine.

The country is facing an economic crisis with a shortage of dollars and a persistent delay in the resumption of IMF programme.

Published in The Express Tribune, December 23rd, 2022.

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