S&P affirms rating on Pakistan at ‘B-’; outlook stable

Monday, 15 November 2010 22:45 - - {{hitsCtrl.values.hits}}

Standard & Poor’s Ratings Services affirmed its ‘B-’ long-term and ‘C’ short-term sovereign credit rating on the Islamic Republic of Pakistan. The outlook on the long-term rating is stable.

Standard & Poor’s also affirmed its ‘B-’ issue rating on Pakistan’s senior unsecured local-currency debt and the transfer and convertibility (T&C) rating of ‘B-’.

Likewise, we affirmed the ‘B-’ issue rating on the sovereign’s senior unsecured foreign-currency debt, as well as its recovery rating of 3, which denotes our expectation of a meaningful recovery of 60%-70% in the event of a distressed debt exchange or payment default.

“The ratings affirmation takes into account Pakistan’s improved external liquidity position, which was largely due to the International Monetary Fund (IMF) standby loan agreement and other bilateral and multilateral support,” said Standard & Poor’s credit analyst Agost Benard.

“This credit strength is weighed against the sovereign’s high public and external leverage, political and security risks, and fiscal inflexibility due to an exceedingly narrow tax base,” he said.

“We could lower the ratings if major slippages in policy occur, resulting in renewed balance of payments difficulties or rising public debt trajectory.

Conversely, we could raise the ratings if Pakistan is able to sustain its macroeconomic stabilization program and fiscal consolidation efforts-indicated by moderating fiscal deficit and a steady reduction in public debt,” he added.