S&P Global has downgraded Pakistan’s outlook to negative from stable, as a depreciating currency, tighter global financial conditions and higher commodity prices weaken the government’s external position.

S&P Global reaffirmed its sovereign credit rating of “B-/B” and said it expected external resources to remain “under pressure”, even after an expected IMF disbursement of $1.3bn.

“The Pakistan government has considerable external indebtedness and liquidity needs, and an elevated general government fiscal deficit and debt stock,” S&P said.

Pakistan, which has been rocked by high inflation and currency depreciation, is teetering on the edge of default. The rupee has fallen sharply this year and has had its worst week in two decades, and a $1.2bn loan disbursement from the IMF may not be enough for the country to end its economic plight.

A weaker currency will make it more difficult for Pakistan to pay off foreign debt. In June, a consortium of Chinese banks lent the country $2.3bn to help with those obligations.

While Pakistan’s government has tried to tackle these issues, the credit rating agency said “the risk of continued deterioration in key metrics, including external liquidity, is rising.”

S&P said high inflation is expected to weigh on any growth Pakistan will achieve in the coming years, and that rising costs will make debt service more challenging.

“Achieving a primary fiscal balance surplus, and boosting its stock of foreign exchange reserves will also be more difficult for the government to achieve against the current external backdrop,” it said.