Pakistan’s Credit Rating Increased

The Singapore-based Standard & Poor’s Ratings Services on Monday raised Pakistan’s long-term sovereign credit ratings by one notch, to ‘B+’ for foreign currency and ‘BB’ for local currency.

An announcement by the rating agency said the upgrades reflect declining debt and debt-servicing burdens, as well as sustained economic progress. The rating actions also reflect Pakistan’s (foreign currency B+/ Stable/B; local currency BB/ Stable/B) moderate external liquidity position, it said.

The agency, however, warned quick souring of Pakistan-India relations and said the outlook reflects the high political and associated economic risks. “Ties with India, although having improved recently, could sour quickly,” it said.

More permanent detente with India could bring about a sizable peace dividend and more economic benefits, lifting Pakistan’s growth prospects. The agency said Pakistan’s macroeconomic conditions continue to improve because of responsible economic management and gradual structural reforms.

Its economy has outperformed expectations by registering real GDP growth of 6.4 per cent in fiscal year 2004 ended June 30, the fastest in over 10 years. The higher growth rate reflects both cyclical factors, and growing domestic confidence, evident in consumption and investment growth…