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S&P lowers Pakistan’s currency credit rating
LONDON: Standard & Poor's Ratings Services said today it lowered its long-term foreign currency sovereign credit rating on the Islamic Republic of Pakistan to 'CCC' from 'CCC+' and its long-term local currency rating to 'CCC+' from 'B-'. The outlook on the long-term rating is developing. The rating on Pakistan's senior unsecured local currency debt has also been lowered to 'CCC+' from 'B-', while the foreign currency debt rating has been lowered to 'CCC' from 'CCC+'. In tandem with lowering of the sovereign rating, Pakistan's transfer and convertibility (T&C) rating has moved to 'B-' from 'B'. Likewise, the foreign currency issue rating on Pakistan International Sukuk Co. has been lowered to 'CCC'from 'CCC+'. "The downgrade reflects our view that ongoing delay by Pakistan in securing external assistance essential for the immediate stabilization of its balance of payments position has further increased the prospect of near-term debt service difficulties, heralding either a rescheduling of commercial external debt or an outright payment default," said Standard &Poor's credit analyst Agost Benard. Despite numerous attempts over the recent months, the administration has only been able to secure minimal multilateral and bilateral aid, including from countries deemed to have a strategic interest in Pakistan's economic and political stability. Without a formal macroeconomic stabilization program--likely within the framework of an International Monetary Fund (IMF) loan program--it appears that no substantive material assistance from such sources will be forthcoming. Although the administration sees an IMF program as inevitable, it is being delayed by political considerations. "Both the ruling PPP and opposition parties appear unwilling to undertake the necessary fiscal correction to make an external adjustment credible," Mr. Benard said. The current rating and developing outlook also take into account Standard & Poor's view that, while an IMF program and resultant fund inflows should halt further balance of payments deterioration and avert default in the near term, Pakistan's fluid internal political situation means there is no assurance that a stabilization program will succeed.
Courtesy Geo