Ratings and risks

Description

This article analyses Pakistan’s 2022 sovereign credit-rating downgrade amid declining foreign-exchange reserves, currency depreciation, high inflation, debt-servicing pressures and the economic damage caused by severe flooding. It examines the limitations of short-term external assistance and warns against maintaining an artificially overvalued exchange rate. The article recommends structural reform, credible monetary policy, climate-resilient financing and a coordinated mix of exchange-rate, macroprudential and capital-flow measures to restore financial stability and investor confidence.