KARACHI: Pakistan’s reserves adequacy is among the lowest of rated sovereigns covering less than two months of imports as of September 2018”, notes Moody’s in its ‘Global Emerging Markets: Outlook’ report.
The agency, which rates Pakistan at B3 Negative, expects the country’s external vulnerability indicator (EVI) ratio to rise to 153 per cent in 2019, Dawn reported
This EVI ratio indicates country’s immediately available foreign exchange resources sufficiency to allow it to make all external debt payments, even if there is a complete refusal of creditors to roll over debt due within a given year.
“Maldives, Mongolia, Pakistan and Sri Lanka are particularly susceptible to shifts in external financing conditions”, highlights the report. However, “successful negotiations for a new International Monetary Fund programme would reduce external financing risks”, adds the report.
Moody’s has kept the outlook for global emerging markets (EM) “broadly stable” but warns of risks from “higher rates, politics and trade tensions”. EM issuers who have raised considerable debt in low interest rate era are likely to face significant refinancing risks in 2019 as interest rates rise and capital flow volatility increases.
The report highlights that “although the share of [Pakistan’s] foreign currency debt is relatively low at around 35 percent of total government debt, declining foreign reserves because of a current account deficit of around 4.0-5.0 percent of GDP raise repayment risks.”