February 4, 2019 / 6:08 AM / a month ago

UPDATE 1-S&P cuts Pakistan's credit rating to 'B-' from 'B'; keeps stable outlook

(Adds comments from S&P release)

Feb 4 (Reuters) - S&P Global Ratings on Monday lowered Pakistan’s sovereign credit rating one notch to ‘B-‘ from ‘B’, citing diminished growth prospects and elevated external and fiscal stresses.

In S&P’s system, B- is six steps below an investment grade rating.

S&P maintained Pakistan’s rating outlook at “stable”, adding that it reflects expectations the country will secure sufficient financing to meet its external obligations over the next 12 months, and that neither external nor fiscal metrics will deteriorate well beyond the current projections.

Pakistan is set to receive a $3 billion loan package from the United Arab Emirates (UAE) in-order to help bridge a yawning current account deficit and shore up foreign reserves.

S&P noted that “while Pakistan has secured financial aid from bilateral partners to address its immediate external financing needs, we believe that fiscal and external imbalances will remain elevated”.

The ratings agency said that the government’s protracted negotiations with the International Monetary Fund (IMF) suggest that the resulting reforms will be less “expedient” than previously anticipated.

Fitch in December downgraded Pakistan’s long-term foreign currency issuer default rating to ‘B-‘ from ‘B’, citing a rise in external financing risk from low reserves and high external debt repayments, along with a continued deterioration in the economy’s fiscal position. (Reporting by Shubham Kalia in Bengaluru; Editing by Subhranshu Sahu and Richard Borsuk)

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