Fitch foresees further hike in interest rate

ISLAMABAD: The Fitch Ratings agency has anticipated further interest-rate hike for Pakistan.

The ratings agency in its latest report, “Fitch Ratings 2022 Outlook: Asia-Pacific Sovereigns”, stated that monetary policies will 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 the 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).

Pakistan’s recent policy measures to curtail rising external risks: Fitch

Ratings 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 hard hit by the virus.

Fitch Ratings in its last month’s 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 accelerates from its already high levels.

The rating agency in a 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.

Copyright Business Recorder, 2021