Pakistan Water and Power Development Authority’s (WAPDA) outlook has been downgraded from stable to negative by Moody’s Investors Service.
Moody’s has also confirmed the company’s B3 corporate family rating (CFR) and b3 Baseline Credit Assessment (BCA).
On 2 June 2022, Moody’s confirmed the Government of Pakistan’s B3 ratings with a negative outlook from stable.
Pakistan’s increased external vulnerability risk and concern about the sovereign’s ability to acquire additional external funding to cover its needs prompted the decision to modify the outlook to negative.
Rising inflation, according to Moody’s, has exacerbated Pakistan’s external vulnerability risk, putting downward pressure on the current account, currency, and – already thin – foreign exchange reserves, especially in the context of heightened political and social risk.
Pakistan’s poor institutions and governance add to the uncertainties surrounding macroeconomic policy’s future trajectory, especially whether the government will finish the current IMF Extended Fund Facility (EFF) programme and maintain a credible policy path that allows for further funding.
Despite the downside risks indicated above, Moody’s believes Pakistan will complete the seventh review under the IMF EFF programme by the second half of this calendar year and sustain its involvement with the IMF, resulting in further funding from other bilateral and multilateral partners.
In this situation, Moody’s believes Pakistan will be able to bridge its funding shortfall in the coming years. The B3 rating also takes into account Moody’s assessment of Pakistan’s economy’s size and solid growth prospects, which will provide the country considerable shock absorbency.
These credit qualities are counterbalanced by Pakistan’s fragile foreign payments situation, poor governance, and extremely weak fiscal strength, which includes extremely weak debt unaffordability.
To read our blog on “Moody’s expects Pakistan’s Islamic banking assets to increase by 28% over the next five years,” click here.
