Islamabad

In view of the worsening liquidity and limited external funding since the beginning of this year, Fitch Ratings downgraded Pakistan's outlook to negative from stable.

In a statement, Fitch Ratings said that the revision of the outlook to negative reflects a significant deterioration in Pakistan's external liquidity position and financing conditions since early 2022.

 "We assume IMF board approval of Pakistan's new staff-level agreement with the IMF, but see considerable risks to its implementation and to continued access to financing after the programme's expiry in June 2023 in a tough economic and political climate," read the statement.

According to the agency the new Pakistan government is supported by a disparate coalition of parties with a slim majority in parliament.

With regular elections due in October 2023, it feels there is a risk of policy slippage after the conclusion of the IMF programme.

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Giving another reason for downgrading Pakistan's rating, Fitch said that limited external funding and large current account deficits have drained foreign exchange reserves of the country.