Friday, 03 July, 2020
Moody’s warns Pakistan on high debt refinancing

Moody’s warns Pakistan on high debt refinancing

Pakistan is likely to face high refinancing cost for its international bonds maturing over the next two years that would increase the country’s debt burden, ratings agency Moody’s said on Wednesday.

Moody’s Investors Service said international bonds issued by frontier market governments in Asia Pacific and Africa are coming due over the next two years in a tighter refinancing environment.

Pakistan tops the countries that “will prove the most exposed to more costly debt financing as (its) international sovereign bonds mature in 2019 and 2020,” Moody’s said in a report titled ‘Sovereigns — Frontier markets: Maturing international bonds contribute to exposure to financing risks’.

“If the tighter financing conditions are pronounced and sustained, such a situation would weaken the debt affordability for these countries, and raise their debt burden, especially if local currencies depreciate,” the ratings agency said.

Currently, at least eight Pakistani bonds are trading in the international market. A five-year Eurobond that fetched the country one billion dollars in 2014 is maturing next year.

Pakistan was among the economies that rushed to international market to raise funds amid low interest rate scenario in the past.

Last year, the government raised $2.5 billion in dollar-denominated Eurobond and sukuk.

In December last year, Moody’s assigned B3 rating to Pakistan, reflecting a credit profile that balances robust growth potential and a relatively large economy, against low income levels, infrastructure constraints and very low global competitiveness.

The country is already facing immense pressure on its balance of payment position as the country’s foreign reserves plunged more than half a billion dollars at one fell swoop, forcing authorities to spring into action to avert external account crisis by letting the rupee value down around eight percent in a single day.

Moody’s said a further drain on foreign exchange reserves would raise the risk of lower capital inflows and higher refinancing costs, “posing negative pressure” on the credit profile.

In a previous report, Moody’s warned that the government’s high debt burden, very narrow revenue base, fragile external payments position and high political risk constrain the credit profile.

“Pakistan’s economy demonstrates relatively robust GDP growth, limited by supply-side constraints on the economy,” it said. “While the scale of the economy is relatively large, Pakistan’s per capita income is very low, indicating limited capacity to absorb negative shocks.”

Post a Comment
Related News
Utility Stores Corporation has recorded highest ever sales in the history, claims Umer Lodhi, Managing Director, Utility Stores Corporation of Pakistan.
According to a recent report published by International Monetary Fund (IMF), Pakistan's general government debt (including guarantees & IMF borrowing) during the first quarter of current fiscal year, showed significant decline as it fell to 84.7 percent of Gross Domestic Product (GDP), however by the end of previous year, the country's debt had risen to 88 percent of GDP.
Only weeks after the former finance minister assured the country that he did not “see any need for further devaluation” of the rupee, the markets proved him wrong. The rupee slipped by 3.8 per cent in the interbank market, or Rs4.40, on Monday to settle at Rs119.8 to a dollar.
Chinese multinational mobile firm Huawei sold around one million smartphones to tech enthusiasts in Pakistan during the last year, and geared up efforts to become the top selling brand by this yearend through winning the price war, its executive said.

Most Popular
Media has conceived the world a global village. The current era is considered to be the era of media since it is perceived as the 4th de facto pillar of any state.
Prime Minister Imran Khan urges the international community to hold India accountable for its human rights abuses in Indian Occupied Jammu and Kashmir (IoK) where women, men and children have faced pellet guns, sexual assault and electrocution, physical and mental torture.
At least 30 innocent Kashmiris have been martyred by Indian armed forces since the beginning of this month alone.
Turkey is reportedly planning to set up two permanent military bases in Libya following the Tripoli government’s operation to retake areas seized by rebel forces under the command of renegade general Khalifa Haftar.

Our Partners
Features and Analysis
Poetry & Literature
Local News
Readers Service