Moody’s Rating Review

Pakistan’s outlook upgraded to ‘stable’…
Moody’s Investors Service recently upgraded Pakistan's outlook from B3 with ‘negative’ to B3 with ‘stable’. Moody’s cited greater financial assistance from the IMF and subsequent lowering of potential risks from any drop in private capital inflows as the reason for the outlook upgrade. Moody’s rating up gradation was expected due to some improvement on the economic front. However, Pakistan's credit rating is still lower than that for most other economies in the region, where long-term sovereign rating for Hungary and Turkey are Baa1 and Ba3. Considering that Pakistan's broad economic fundamentals are comparable and in some cases even better than these two economies and it is expected for further upward revision in Pakistan's outlook if political risks remain manageable.
Pakistan’s Economy rising….…
Pakistan's economy has been showing considerable signs of recovery. Inflation has declined to 11.2% in July 2009 from its peak of 25.3% in August 2008. Core inflation
has also dropped to 14.0% in July-09 from its peak of 18.9% in Feb-09.ÊCurrent Account Deficit has come down to 5.3% of GDP in FY09 compared to 8.5% in
FY08 while fiscal deficit has slipped from 7.6% of GDP to 4.3% during the same period. Furthermore, compared to FY09, exchange rate has become relatively stable while Pakistan's Forex reserves have increased to $11.8 billion from $9.9 billion in Dec 2008. All of these factors had already been pointing towards a favourable review from international credit rating agencies. Major bank outlook changed...
Moody's Investors Service has changed the outlook on the B3 long-term foreign currency deposit ratings of four Pakistani banks to stable from negative. The banks affected by the rating action include National Bank of Pakistan (B3 Stable/NP/D), Habib Bank Limited (B3 Stable/NP/D), United Bank Limited (B3 Stable/NP/D) and MCB Bank Limited (B3 Stable/NP/D).
What’s in it for us?
Well it is a major positive on the short-term. However efforts are to be made to ensure that the stable outlook is converted to positive outlook in the medium to long term basis. The country needs to focus on the fundamentals of the economy. Twin deficits of the economy have to be brought down to sustainable levels, domestic saving rate has to be increased in order to finance the needed investment, price stability has to be restored and energy shortages have to be eliminated. Investment grading rating is a reflection of country’s economic performance which is not bestowed by some outside forces but by the hard work of our own people.