Pakistani banks’ outlook downgraded by Moody’s

by Richard Kilner

Story link: Pakistani banks’ outlook downgraded by Moody’s

Yesterday Moody’s evaluated the outlook for Pakistani banks with a negative rating.

The downgrading was due to the political instability in the country, and the risks inherent to such a situation. Moody’s expects the Pakistani banking sector to be robust in the immediate future, but could face difficulties should the uncertain political situation continue for too long.

Nondas Nicolaides, the report’s author and assistant vice president, has written that the present political situation makes the environment somewhat challenging, and this has damaged the confidence of both investors and businesses.

Despite this problem Moody’s has seen that the Pakistani financial system continues to become more efficient, boosted by privatisation and consolidation, which has also benefited competition.

Credit growth also remains at a strong level.

The new lending of Pakistani banks remains untried, and this could pose a problem in the economic downturn the world is expected to experience next year.

Attempts are ongoing to ensure a superior oversight system is established, equal to those in the bestr egulated nations. However, enacting all necessary steps could prove challenging, the report warns.

In addition, Moody’s believe that the country will have to improve its financial infrastructure.