SATURDAY MAY 07: No near-term risk to credit rating: US needs Pakistan to keep supply lines open: Moody's

KARACHI: Pakistan does not face any near-term risk on its sovereign credit rating but Osama bin Laden's killing could raise long-term uncertainties, Moody's Investors Service said on Friday. Moody's currently ranks Pakistan's sovereign debt as highly speculative at B3, with a stable outlook as the co-dependency between the United States and Pakistan remains "sizeable".
Standard & Poor's gives Pakistan its equivalent B- rating. "We do not think there will be a precipitous shift in the political relationship between the United States and Pakistan," Aninda Mitra, Moody's sovereign analyst for Pakistan, said in a statement. "Nor do we think there will be a sudden removal of, or sizeable reduction in, the scope of direct military and civilian assistance by the US authorities." However, many US lawmakers have called for a review of aid to Pakistan as they are doubtful of Pakistan's co-operation against al Qaeda, and have questioned how it was possible for bin Laden to live near a military training academy without the knowledge of the Pakistani authorities.
Mitra said the United States needs Pakistan to keep supply lines open in Afghanistan, while Pakistan relies on US aid and its backing for an International Monetary Fund loan programme. Moody's also said lack of fiscal reform remained a drag on Pakistan's credit rating that had little to do with external factors.
"The slow pace and shortcomings of Pakistan's reform programme derive from the political fractiousness between its civilian political parties, and institutional divisions between the executive and judiciary," said Mitra. In the medium term, Moody's flagged potential risks including the United States reviewing its assistance and deteriorating relationships between Pakistan's civilian and military authorities. "These uncertainties will add to political stress on the bilateral relationship, but not derail it," said Mitra.