The B+ target
Finance Minister Muhammad Aurangzeb has named B+ as the sovereign rating he wants Pakistan to hold by the next fiscal year. He linked the hoped-for Pakistan credit rating upgrade to improvement in the economy of Pakistan, in remarks to Bloomberg TV reported by ProPakistani. A sovereign credit rating is an agency's judgement of how likely a government is to repay its debts. The B+ mark remains a government target, not a grade an agency has already given.
Upgrades already on record
Since last year, agencies have raised the country's grade three times, ProPakistani reported. In August, Moody's Ratings moved the country from Caa1 to B3. In July, S&P Global Ratings moved it from B- to B, citing better economic conditions and a stronger financial position. The report identifies those two decisions and does not name the agency behind the third.
That record is the backdrop to the Pakistan credit rating upgrade the minister is now seeking. In 2022, Pakistan came within a narrow margin of default, with support from the International Monetary Fund (IMF), the lender governments turn to when foreign payments are under strain. Reserves of foreign exchange have since reached a record high, after a $3 billion Eurobond, Pakistan's first such sale in four years. A Eurobond is debt sold to investors abroad.
A wider set of borrowing tools
On fresh bond sales, Aurangzeb said Pakistan was in no rush during this fiscal year, even as it widens the set of borrowing tools. Banks have been appointed for future sukuk issues. Sukuk are Islamic bonds, built so they do not rely on conventional interest. The government is also looking at rupee-denominated bonds that would be settled in dollars.
Bids are to be sought soon for what remains of the panda bond programme. Panda bonds are yuan-denominated bonds sold in China by a foreign borrower. Tokenising Eurobonds already outstanding, by recording them in digital form, is under consideration. Across the next two to three years, some short-term external debt would be replaced with longer-term borrowing, lowering rollover risk (the need to refinance loans as they fall due) while the total, now close to $100 billion, stays broadly stable.
Talks with the United States
Aurangzeb said talks with the United States are active on a proposed $10 billion facility. He cast it as liquidity support, meaning funds to help meet near-term payment needs, rather than a conventional loan or credit line. Those talks coincide with trade-tariff discussions that, he said, are approaching their final phase.
On a separate track, the two governments are discussing possible US-backed investment in agriculture, minerals and mining, channelled through the US Export-Import Bank and the International Development Finance Corporation. Aurangzeb added that US investors were interested in Pakistan's refinery sector. He also said a new automobile policy was expected to be approved within weeks.
