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Fitch Anticipates Further Interest-Rate Hike for Pakistan

Fitch Ratings anticipates further interest-rate hike for Pakistan, stating the country is facing external pressure.

The Hong Kong-based Fitch Ratings, in its latest report, “Fitch Ratings 2022 Outlook: Asia-Pacific Sovereigns”, stated that monetary policies would also remain supportive. “Though we anticipate interest-rate hikes to continue in South Korea and New Zealand as their recoveries solidify, and in “frontier markets” facing external pressures such as Sri Lanka and Pakistan. We anticipate rate hikes later in the year in emerging markets such as India and Indonesia; China to ease; and Japan’s accommodative stance to remain on hold,” it added.

The report noted that APAC sovereigns span the triple-A to triple-C spectrum, across advanced economies such as Australia and Singapore (both AAA), emerging markets such as Indonesia and the Philippines (both BBB), frontier markets such as Mongolia (B) and Pakistan (B-), and economies with fragile external finances such as Sri Lanka and Laos (both CCC). Rating pressures have eased from a year ago, but we retain Negative Outlooks for India and Japan, with high public debt ratios and uncertain trajectories, and the Philippines, which has been especially hit hard by the virus.

Fitch, in its last monthly report, stated that continued adherence to the Intentional Monetary Fund (IMF) Extended Fund Facility (EFF) reform agenda would increase the likelihood of achieving outcomes that would lead Pakistan to positive rating momentum, however, political pressures could test the government’s commitment to reform, particularly if inflation rises from its already high levels.

The rating agency in its report, “Reforms and Financial Support Ease Pakistan Sovereign Risks,” stated that ongoing reforms, if sustained, could create positive momentum for the sovereign’s ‘B-’ rating, which was affirmed in May 2021 with a Stable Outlook.

Source: Pro Pakistani

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