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Pakistan may face serious financing issues: Moody’s

Pakistan may face serious financing issues: Moody's

Karachi, Sep 13 (IANS) Moodys credit rating agency has placed Pakistan among countries that might face serious financing issues in the extreme scenario under the ongoing US-China trade tensions as Islamabads reliance on foreign currency borrowing and thin reserve coverage of external debt payments have weakened its debt affordability.

While Moody's assume generally stable financing conditions with slowing global growth, the ongoing US-China tensions and global flashpoints of political risk, sovereigns in emerging markets (EM) and frontier markets (FM) face a material risk of a period of heightened financing stress, reported The Express Tribune.

"Greatest exposure is among B-rated sovereigns in Asia-Pacific (APAC), Middle East and North Africa (MENA) and Latin America (LatAm), which see the sharpest deterioration in credit metrics when stressed due to weak debt affordability, reliance on foreign-currency borrowing and thin reserve coverage of external debt payments," Moody's Investors Service said in its sector in-depth report on "Sovereigns - Global: B-rated sovereigns in APAC, LatAm and MENA most exposed to financing stress".

 

The agency has said that Pakistan along with a few other countries were particularly exposed to an economic shock.

In terms of debt affordability, Pakistan, Sri Lanka, Egypt, Angola, and Ghana would see the most significant deterioration in their interest payments-to-revenue ratios compared to the baseline 2019-20 forecasts.

Pakistan's external financing gap has been alleviated by a $6 billion, 39-month IMF agreement, along with other bilateral and multilateral borrowings providing an external buffer, "however, external vulnerability remains high following years of wide current account deficits and a lack of substantial non-debt-creating foreign exchange inflows".

Pakistan's fiscal profile has been weakened further by higher interest rates following the central bank's cumulative 750-basis-point hike over the last two years in response to external imbalances.

With the frequent rollover of short-term treasury bills, these higher domestic interest rates have rapidly increased the government's borrowing costs.

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Pakistan may face serious financing issues: Moody's

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Gopi Adusumilli is a Programmer. He is the editor of SocialNews.XYZ and President of AGK Fire Inc. He enjoys designing websites, developing mobile applications and publishing news articles on current events from various authenticated news sources. When it comes to writing he likes to write about current world politics and Indian Movies. His future plans include developing SocialNews.XYZ into a News website that has no bias or judgment towards any. He can be reached at gopi@socialnews.xyz

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