ISLAMABAD: Fitch Ratings, a global credit rating agency, has upgraded Pakistan’s long-term foreign currency issuer default rating (IDR) to ‘CCC+,’ the agency said on Monday, indicating an increase in the country’s foreign exchange reserves, while the central bank cut the key interest rate by 100 basis points to 19.5 percent in line with expectations of investors and analysts.
Fitch Ratings provides independent opinions on the creditworthiness of issuers and their debt obligations by evaluating the likelihood of repayment, and assigns ratings to help investors assess the risk of lending to or investing in a particular entity.
The upgrade reflects greater certainty over continued availability of external funding, in the context of Pakistan’s staff-level agreement with the International Monetary Fund (IMF) on a new 37-month, $7 billion extended fund facility (EFF).
“Strong performance on the previous, more temporary IMF arrangement helped the country narrow fiscal deficits and rebuild foreign exchange (FX) reserves, and further improvements are likely,” the ratings agency said in its report.
But it said the South Asian nation’s large funding needs put it in a “vulnerable situation,” if it failed to implement challenging reforms that could undermine program performance and funding.
“The government will have to obtain new funding assurances from bilateral partners, chiefly Saudi Arabia, the United Arab Emirates and China, totalling about USD 4-5 billion over the duration of the EFF,” the report read.
“We believe this will be achievable, given the strong past record of support and significant policy measures in the recent budget for the fiscal year ending June 2025 (FY25).”
Fitch said the incumbent Pakistani government aimed to tackle weaknesses in the country’s tax system, energy sector and state-owned enterprises under the new EFF through higher taxes on the country’s agricultural sector.
“We forecast the current account deficit to stay relatively contained at about $4 billion (about 1 percent of GDP) in FY25, after about $700 million in FY24, given tight financing conditions and subdued domestic demand,” the agency said.
Finance Minister Muhammad Aurangzeb said the rating upgrade came in the backdrop of currency stabilization, increase in foreign reserves and decline in inflation in Pakistan.
“This is a reflection of that journey in which we have been working hard for the last four to five months to get more permanence in the macroeconomic stability. Especially now with the staff-level agreement [with the IMF] having been in place, it has played a very important role in terms of helping with this upgrading,” he said in televised comments.
The minister said all macro-economic indicators in the country were “positive” and “in the right direction.”
“This [rating upgrade] is important because if we are to make this the last [IMF] program, there has to be a road to the market,” he said.
“As I also mentioned yesterday, export-led growth, foreign direct investment, which is again very much dependent on sovereign ratings, especially that foreign direct investment that can take us to exports and finally international capital markets, therefore, this particular upgrading is the beginning of that journey.”
‘GOOD NEWS FOR INDUSTRY’
The Fitch report came as Pakistan cut its key interest rate by 100 basis point to 19.5 percent, according to the central bank.
Finance Minister Aurangzeb described the rate cut as a “very good news for the industry.”
“As the inflation will decrease gradually, we will see the policy rate coming further down during this fiscal year. So that we go back into the private sector credit off-take, which has been stagnant for long,” he said in his televised comments.
“Both these developments that happened today, they are very positive for the economy as we go forward.”
The decision to cut policy rate was made in view of a decline in inflation, improving current account deficit and an increase in central bank reserves, according to the central bank chief.
“The current account deficit was $17.5 billion in fiscal year 22, which was reduced to $3.3 billion in 2023. This year, that number is only $700 million, which is 0.2 percent of the GDP,” State Bank of Pakistan (SBP) Governor Jameel Ahmed said at a press conference.
“Along with this, the state bank reserves have also witnessed improvement. In June 2023, our reserves were $4.4 billion, which have increased to $9.5 billion in June this year.”
He noted the country’s oil imports had gradually decreased and an improvement in external account inflows had strengthened the current account.
“Oil imports, which were at $2.3 billion in the first quarter of 2023, came down to $1.4 billion in the last quarter (Apr-Jun 2024),” Ahmed said. “This fiscal year, our GDP growth, which was 2.4 percent in the outgoing year, our assessment is that it will be between 2.5 percent and 3.5 percent.”
Similarly, the SBP chief said, the current account deficit was projected to be 0-1 this fiscal year, while average inflation would be 11.5-13.5 percent.
Fitch upgrades Pakistan’s foreign-currency debt rating, central bank cuts key interest rate
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Fitch upgrades Pakistan’s foreign-currency debt rating, central bank cuts key interest rate
- Fitch Ratings says Pakistan’s large funding needs put it in ‘vulnerable situation’ if it failed to implement reforms under new IMF deal
- Report came as Pakistan cut key interest rate by 100to 19.5 percent amid decline in inflation, improving current account, increase in reserves
Pakistani stocks break psychological 99,000 barrier on optimism over rates, reserves
- An analyst attributes the intraday rally to broad-based gains across most economic sectors
- The stock market has remained bullish since the government slashed policy rate in November
ISLAMABAD: The Pakistan Stock Exchange (PSX) on Friday breached a major psychological barrier, surging past 99,000 points during intra-day trading before settling at 97,798.23, as analysts attributed the rally to investor optimism driven by falling lending rates and higher foreign exchange reserves.
The benchmark KSE-100 index climbed 2,057.40 points by 11:10 am, reaching 99,385.79 points from the previous close. However, the index closed at 97,798.23, marking an increase of 469.84 points or 0.48 percent.
Analyst Ahsan Mehanti of Arif Habib Corporation said bank levies on large deposits, surging global oil prices, and rupee stability were fueling investor optimism.
“Stocks remained bullish, led by scrips across the board, as investors weighed falling lending rates and the imposition of bank levies on large deposits following a drop in government bond yields,” he told Arab News. “Surging global crude oil prices, rupee stability, and higher forex reserves played a catalytic role in the record surge at the PSX.”
Last month, Pakistan’s external current account recorded a surplus of $349 million, marking the third consecutive month of surplus and the highest in this period. The current account reflects a nation’s transactions with the world, encompassing net trade in goods and services, net earnings on cross-border investments and net transfer payments.
A surplus indicates that a country is exporting more than it is importing, thereby strengthening its foreign exchange reserves.
A bullish trend has been observed in the stock market since Pakistan’s central bank cut its key policy rate by 250 basis points, bringing it to 15 percent earlier this month. Economic indicators have also steadily improved since securing a 37-month, $7 billion bailout from the International Monetary Fund (IMF) in September.
In the past, the country faced a prolonged economic crisis that drained its foreign exchange reserves and saw its currency weaken amid double-digit inflation. Last year, Pakistan narrowly avoided a sovereign default by clinching a last-minute $3 billion IMF bailout deal.
US vows to be ‘steadfast partner’ after deadly attack in Pakistan’s Kurram district
- American diplomatic mission says Pakistanis deserve to live free from harm, danger and threat
- It offers condolences to victims’ families after 41 people were killed by unknown gunmen this week
KARACHI: The United States on Friday condemned a deadly attack in Pakistan’s Kurram district that killed 41 people this week, reaffirming its commitment to stand with Pakistan in ensuring the safety of its citizens against such militant attacks.
Unidentified gunmen targeted vehicles carrying Shiite community members in the Kurram district of Khyber Pakhtunkhwa province on Thursday, in one of the deadliest sectarian attacks in recent years. The assault, which also left many critically injured, occurred in a region already plagued by deadly clashes in recent months.
“The United States will remain a steadfast partner as Pakistan works to ensure the safety and security of all its citizens,” Jonathan Lalley, the spokesperson of the US diplomatic mission in Pakistan, said in a statement. “We stand in solidarity with Pakistan and the people of Khyber Pakhtunkhwa in this difficult time.”
Lalley expressed condolences to the victims’ families and called for a full recovery for the injured.
“The Pakistani people deserve to live free from harm, danger, and threat, and to feel protected and secure in their daily lives,” he added.
No group has claimed responsibility for the attack, which followed the reopening of a key highway in the region after it was closed for weeks due to sectarian violence.
Kurram, a volatile district near the Afghan border, has been a flashpoint for sectarian clashes between Sunni and Shiite communities, adding to the challenges of maintaining security in the area.
The US-Pakistan forged a counterterrorism partnership in the aftermath of the September 11, 2001, attacks, to address regional security challenges. Over the years, however, the relationship faced friction, while the US-led international forces were in Afghanistan.
Despite the tensions, both countries reaffirmed their commitment to security cooperation and counterterrorism efforts, especially in the wake of the US military withdrawal from Afghanistan in 2021.
The commitment to security partnership reflects a shared goal of combating extremism and ensuring regional stability.
Pakistan, Malaysia agree to enhance military cooperation with focus on air force training
- Malaysian air chief praises PAF’s advancements in indigenization on his first Pakistan visit
- His Pakistani counterpart reaffirms commitment to training Malaysian Air Force personnel
ISLAMABAD: Pakistan and Malaysia have agreed to deepen bilateral military cooperation, with a particular emphasis on joint training and air power collaboration, Pakistan’s military said on Friday.
The understanding was reached during a meeting between Pakistan Air Force (PAF) Chief Air Chief Marshal Zaheer Ahmed Baber Sidhu and Royal Malaysian Air Force Chief General Tan Sri Dato’ Sri Mohd Asghar Khan bin Goriman Khan at Air Headquarters in Islamabad.
“The [Pakistan] Air Chief reaffirmed his commitment to enhancing military partnership between the two Air Forces through joint training initiatives, particularly within the realm of air power,” the Inter-Services Public Relations (ISPR) said in a statement. “These initiatives will encompass provisioning of both basic and tactical level training for personnel of the Malaysian Air Force.”
The Malaysian air chief, making his first visit to Pakistan, praised the PAF’s advancements in indigenization and technological innovation. He also expressed interest in bolstering ties through enhanced collaboration in training, maintenance and operational excellence.
The meeting included discussions on defense cooperation, joint exercises and technology sharing, ISPR said, highlighting the robust defense relationship between the two nations.
During his visit, the Malaysian official toured the National Aerospace Science & Technology Park Silicon and the PAF Cyber Command, where he was briefed on Pakistan’s advanced operational capabilities.
He also lauded the innovative projects displayed at the ongoing International Defense Exhibition IDEAS-2024 in Karachi.
Earlier, the Malaysian air chief was presented with a guard of honor upon his arrival, ISPR added.
Pakistan government doubles down on preventing Imran Khan’s Nov. 24 protest
- Interior Minister Mohsin Naqvi warns no talks if Khan’s PTI proceeds with the protest
- Ex-premier’s party plans a ‘long march’ to Islamabad, seeking his release from prison
ISLAMABAD: Pakistan’s Interior Minister Mohsin Naqvi on Friday vowed to implement the Islamabad High Court’s (IHC) order, refusing to allow former prime minister Imran Khan’s Pakistan Tehreek-e-Insaf (PTI) party to stage the Nov. 24 protest in the federal capital demanding his release.
The PTI has announced a “long march” to Islamabad, primarily to pressurize the government to end Khan’s imprisoned that has lasted for over a year on what his party contends are politically motivated charges. The protest also aims to raise PTI’s voice against alleged rigging in the February 8 general elections while calling for measures to ensure judicial independence, which the party says has been undermined by the 26th constitutional amendment.
Only a day earlier, the IHC directed the government to form a committee to engage in talks with the PTI, emphasizing the need to avoid disruptions during the three-day visit of Belarusian President Aleksandr Lukashenko to discuss bilateral economic cooperation. The court expressed hope that the PTI would allow “meaningful communication” with the administration while acknowledging that the maintenance of law and order would be the government’s priority if there was no breakthrough between the two sides.
Addressing the media in Islamabad alongside the capital city’s chief commissioner and police chief, the interior minister highlighted that no rally, march or protest would be allowed in the federal capital owing to the Belarusian president’s visit to the country, as per the IHC order.
“No one will be allowed to stage a rally or protest in Islamabad in compliance with the high court order,” Naqvi said. “After the IHC order, we will implement it 100 percent at any cost. We are bound by the law to implement it.”
Regarding the IHC directions to hold talks with the PTI party leadership, the minister said he would speak to Prime Minister Shehbaz Sharif in the evening to constitute a committee “but definitely if they stage a protest, this [negotiation] will get difficult.”
Islamabad’s district magistrate has already imposed a two-month ban on the gathering of more than five people in the capital using Section 144 of the Criminal Procedure Code (CrPC), which allows the government to prohibit various forms of political assembly, gatherings, sit-ins, rallies, demonstrations and other activities for a specified period.
In response to a question about whether the government was in touch with Adiala Jail, where ex-premier Khan is currently incarcerated, Naqvi said he has no contact with anyone there.
The interior minister also highlighted that the capital city’s administration did not receive any application from the PTI to stage a protest.
He made it clear that people violating the court orders would be responsible if there was any loss of life during the Nov. 24 protest.
Naqvi also said that he agreed with the residents of Islamabad that shops, roads, businesses and mobile signals should not be shut down but noted there was no other way of dealing with such protests.
“If they want to come and protest [in Islamabad], I’ll be the one who will say that no talks should take place,” he concluded. “If they want to hold talks, they should do it in a proper manner. This is no way that on one side they protest and on the other call for talks.”
Earlier this week, Pakistan’s interior ministry had authorized the deployment of paramilitary Punjab Rangers and Frontier Corps troops in Islamabad to maintain law and order.
Pakistan’s parliament also passed a law earlier this year to regulate public gatherings in Islamabad, specifying timings for rallies and designating specific areas. The law prescribes three-year jail terms for participants in illegal assemblies and 10-year imprisonment for repeat offenders.
Army chief vows action after deadly week of militant attacks in Pakistan
- Twelve soldiers were killed on Tuesday as militants attacked a checkpost in the northwestern Bannu district
- Gunmen opened fire on vehicles carrying minority Shiite community members in KP province on Thursday, killing 41
ISLAMABAD: Pakistan Army Chief General Asim Munir vowed action against militants on Friday, following a week of deadly attacks in which dozens of civilians and security officials have been killed in the country’s northwest.
In the latest attack, gunmen opened fire on vehicles carrying members of the minority Shiite community in Pakistan’s Khyber Pakhtunkhwa province on Thursday, killing at least 41 people in one of the region’s deadliest such attacks in recent years. The assault took place in Kurram, a district where sectarian clashes have killed dozens of people in recent months. No group has claimed responsibility.
On Tuesday, ten Pakistan army soldiers and two from the paramilitary Frontier Constabulary were killed on Tuesday as militants attacked a checkpost in the northwestern Bannu district.
Pakistan’s Khyber Pakhtunkhwa (KP) province in the northwest and the remote southwestern province of Balochistan have both seen an increase in strikes by militants this year.
“He [Munir] reiterated the army’s firm resolve to dismantle hostile terrorist networks and eradicate the illegal spectrum undermining national security,” the army’s media wing said in a statement, quoting Munir as saying after he attended a security meeting in Peshawar, the provincial capital of Khyber Pakhtunkhwa.
“He assured that through synchronized and robust operations, Pakistan Army in collaboration with Law Enforcement Agencies will relentlessly hunt down the enemies of peace to ensure lasting stability and security.”
In a separate statement, the army said it had carried out three operations in Balochistan on Nov. 20-22, in which four militants had been killed.
On Tuesday, Prime Minister Shehbaz Sharif chaired a meeting of civil and military leaders who gave the go-ahead for a "comprehensive operation" against separatist insurgents in Balochistan.
