Pakistan Ratings Affirmed At 'B-': Outlook Stable

"The outlook on the long-term rating remains stable", says a statement issued by the Standard & Poor's on Monday from Singapore said

"Standard & Poor's also affirmed its 'B-' issue rating on Pakistan's senior unsecured local-currency debt and its 'B-' transfer and convertibility assessment", the statement added.

It said that in addition, 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 the expectation of a meaningful recovery of 50 percent-70 percent in the event of a distressed debt exchange or payment default.

The country's adequate external liquidity supports the ratings on Pakistan. Buoyant remittance inflows, successive loan disbursals by the IMF, and other multilateral loans have materially reduced the risk of near-term external payment difficulties for Pakistan.

Although the current level of external liquidity is likely to diminish somewhat, given the expiry of the IMF loan program in September and the current account likely returning to a deficit position, we expect donor commitments will ensure at least adequate external liquidity in the next two years.

The stable rating outlook balances adequate external liquidity against vulnerability stemming from ongoing structural fiscal weaknesses.

"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 shows progress in its fiscal consolidation efforts, manifested in moderating fiscal deficits and steady reduction in the public debt burden", the statement added.

Copyright APP (Associated Press of Pakistan), 2011