Tuesday saw an increase in the price of Pakistan's 8.25% 2024 dollar bond to 76.4 cents on the dollar, while the 7.375% 2031 bond increased in price by one penny to 44.6 cents on the dollar.

Pakistan's Loan Agreement and Fitch Ratings Upgrade

Following Pakistan's maiden loan agreement with the International Monetary Fund last month, Fitch Ratings Inc. upgraded Pakistan based on a better financial environment.

According to experts led by Krisjanis Krustins, "The upgrade reflects Pakistan's improved external liquidity and funding conditions." They anticipate that the multilateral lender will approve the staff-level agreement in July, enabling them to access funding from bilateral creditors and other sources.

At 12:05 a.m. local time, the nation's major stock index increased 1.1% to reach its best level in 13 months as dollar bonds increased. According to Arif Habib Ltd., the Pakistani rupee decreased by 0.4% to 281 per dollar.

After two downgrades in the previous year, the CCC long-term foreign currency issuer rating was raised by one notch. Despite this, the struggling South Asian economy still has a very high default risk. More than five times Pakistan's foreign exchange reserves, or $23 billion, in external loan commitments are due in the fiscal year beginning in July.

Elections scheduled for October raise questions about whether commitments to implement the IMF's policy recommendations will be kept.

Because of the unstable political environment and substantial external financial demand, program implementation and funding risks persist, according to the experts.

Tuesday saw an increase in the price of Pakistan's 8.25% 2024 dollar bond to 76.4 cents on the dollar, while the 7.375% 2031 bond increased in price by one penny to 44.6 cents on the dollar.

Bond investor opinion of Pakistan's near-term default risk was drastically reduced by the IMF funding chances, driving gains of roughly 60% in the two weeks leading up to July 5. For the country to manage its foreign debt and import payments, the lending arrangement is essential.

According to Fitch, the authorities anticipate receiving $25 billion in outside financing against $15 billion in public debt maturities. According to Fitch, the $9 billion in bilateral funding that is about to mature due to deposits from China, Saudi Arabia, and the UAE will likely be renewed. Ishaq Dar, the finance minister of Pakistan, announced in a televised speech that Saudi Arabia had deposited a new $2 billion loan.

As investors moderated their recent overconfidence in response to a statement from the IMF's resident representative in Pakistan on meeting with the country's major political parties, Pakistan's bonds suffered the greatest losses in developing markets on Friday.

According to Fitch, the low foreign exchange reserves and substantial fiscal deficit are also reflected in the rating. Increased default risk or signs that the government is considering debt restructuring might result in a downgrade, it warned.