Pakistan's Debt Rating Raised
Moody’s rates Pakistan’s foreign debt at B3, six levels below investment grade and the same ranking as Argentina and Bolivia. The country’s local-currency bonds are rated by Moody’s at the same level. India's credit ratings (BBB-/Negative/A-3) are higher than Pakistan's but the ratings may be lowered because of concerns about its rising fiscal deficit of 6.8% of GDP announced in the 2009-10 Budget.
“The upgrade reflects Pakistan’s improved external liquidity position, coupled with its successes in implementing corrective policy measures to rectify an unsustainable fiscal trajectory,” S&P said in a statement. “A narrowing current account deficit, helped by buoyant remittance inflows, and successive disbursals of the IMF and other multilateral loans have reduced the risk of near-term external payment difficulties for Pakistan,” S&P added.
Moody’s rates Pakistan’s foreign debt at B3, six levels below investment grade and the same ranking as Argentina and Bolivia. The country’s local-currency bonds are rated by Moody’s at the same level.
After losing 41% of its value in fiscal 2008-09, the KSE-100 has begun to rebound. The investors returning to the Karachi stocks have pushed the KSE-100 up 43% so far this calender year, up from 6295 points at the end of 2008 to 9030 level yesterday. While it pales in comparison with Mumbai's stock gains of 63%, the KSE's 43% gain is close to the MSCI emerging market index performance of 48% for 2009 so far.
During 2008, Pakistan's foreign currency reserves rapidly declined, economic growth stalled, and the ability to borrow additional cash was impaired when the nation's credit rating was cut by the rating agencies. S&P cut Pakistan's sovereign debt rating from B+, four notches below investment grade, as did Moody's from B1 with a negative outlook, for the first time in nine years, citing "growing economic imbalances and renewed political difficulties."
The signs of an economic rebound in Pakistan are visible today, bringing new investors and businesses to Pakistan. A lot now depends on whether the PPP government lets Mr. Shaukat Tareen, the current finance minister and former Prime Minister Shaukat Aziz's protege, guide the economy forward without undue political interference potentially detrimental to the recovery effort.
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