Pakistan was downgraded to CCC- from CCC+ by Fitch. This comes on the back on the nation’s worsening liquidity and policy risks amid the rapid decline in FX reserves. Its net FX reserves at the State Bank of Pakistan were about $2.9bn on February 3. This amount is less than three weeks of imports and significantly lower than its peak of $20bn at end-August 2021. Pakistan’s external public-debt maturities for the rest of the fiscal year ending June 2023 stand at over $7bn and is expected remain high in FY 2024. Fitch added that while Pakistan’s current account deficit is currently declining, it may widen again in the near future, further increasing the nation’s vulnerability to risks.

Pakistan’s dollar bonds were trading flat at ~41-44 cents on the dollar

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