Moody’s Investors Service upgraded Pakistan’s sovereign credit ratings for the first time since 2008, citing improving foreign-exchange reserves and the government’s economic overhaul under an IMF program.
“With the program now at its mid-point, we consider that the government has achieved significant traction in reforms,” Moody’s analyst Anushka Shah wrote in a statement on Thursday. “Continued commitment to the program would entail, amongst other goals, the government meeting deficit-reduction targets.”
Moody’s raised Pakistan’s foreign currency issuer and senior unsecured bond ratings to B3 from Caa1 with a stable outlook. A stalling of the International Monetary Fund program, or other bilateral support, or a more unstable political environment, will be credit negative, the company said.
“This upgrade will get Pakistan bonds better offers at the international bond-sale” expected this year, Yawar Uz-Zaman, vice president for research at Shajar Capital Pakistan Pvt. in Karachi, said by phone. “This is a confidence booster.”
The yield on Pakistan’s dollar bonds maturing in April 2024 declined six basis points, the most in almost two months, to 6.97 percent as of 12:53 p.m. in Karachi, data compiled by Bloomberg show. The Karachi Stock Exchange 100 Index of shares rose 0.1 percent in a fifth day of gains and the rupee advanced as much as 0.2 percent to the strongest since May 8.
In its budget announced June 5, Prime Minister Nawaz Sharif’s administration said it will increase its capital gains tax to boost revenue and raise economic growth to the highest in nine years. He’s aiming to meet goals under a $6.6 billion IMF loan deal.
(A previous version of this story was corrected to say Moody’s published the statement on Thursday.)