Moody’s changes Pakistan’s outlook to stable from negative

KARACHI: Another good news for Pakistan on the economic front, as Moody’s rating agency has changed Pakistan’s outlook to stable from negative, ARY News reported on Monday.

The Moody’s has kept Pakistan’s rating outlook unchanged to B-3. It further said the Pakistani economy is improving and the biggest challenge being faced by the Pakistani economy, the current account deficit, is also shrinking.

Earlier, the Moody’s in a report released in September, said, “Over the next 12-18 months, banks in Pakistan would see their credit profiles challenged by their high exposure to the country’s low-rated sovereign debt and a slowing economy.”

The report had said that the banks’ operating conditions would be difficult, as GDP growth slowing to 4.3% in the fiscal year ending June 2019, down from 5.8% in 2018.

The agency also observed that Pakistan’s banks face the risk of macroeconomic contagion through a range of channels, including their large holdings of government securities, which caps their credit profiles to the sovereign, and from the authorities’ weakening capacity to support the banks in case of need.

Red more: External pressures continue to weigh on Pakistan’s Forex reserves: Moody’s

The report, however, had said, “On a more positive note, the banks would continue to benefit from stable customer deposits and high liquidity.”

The rating agency weighs the five largest banks in Pakistan by assets. These banks together by assets account for 50 pct of the banking system deposits.