S&P Global Ratings further downgraded Pakistan’s long term sovereign credit rating to ‘CCC+’ from ‘B-‘. Pakistan, foreign exchange reserves which are already under $7 billion level will continue to remain under pressure in the coming year as well, S&P said in a statement. Rising uncertainties owing to the current political and security situation have aggravated problems for Islamabad. At present Pakistan’s foreign exchange reserves are at $6.1 billion.

“Pakistan’s already low foreign exchange reserves will remain under pressure throughout 2023, barring a material decline in oil prices or a step-up in foreign assistance,” Andrew Wood and YeeFarn Phua, analysts at S&P wrote. S&P added that it expected political uncertainty to remain elevated over the coming quarters, with continued pressure from the opposition to hold early elections.

Earlier, ratings agencies Moody’s and Fitch too downgraded Pakistan’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CCC+’ from ‘B-‘. This will make borrowing even tougher and the country will find it tough to manage a debt repayment of over $30 billion this fiscal year.

Fitch in its observation had noted that the downgrade reflects further deterioration in Pakistan’s external liquidity and funding conditions, and the decline of foreign exchange reserves. This is partly a result of widespread floods, which will undermine Pakistan’s efforts to rein in twin fiscal and current account deficits.

Fitch typically does not assign outlooks to sovereigns with a rating of ‘CCC+’ or below, it said in its statement.

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