Bangkok--27 Aug--Standard & Poor's
Standard & Poor's Ratings Services said today that the sovereign credit rating on Pakistan (B-/Stable/C) is not immediately affected by large-scale flooding in the country. Financial support from the international community should ensure that the sovereign's credit metrics remain commensurate with the rating in the short term.
Standard & Poor's believes that the extenuating circumstances of the catastrophe will be sufficient reason for the International Monetary Fund to consider relaxing its stand-by arrangement program targets and offer additional assistance to Pakistan under a different scheme. We also expect that multilateral organizations and donor countries, in particular the "Friends of Pakistan" group, are likely to be compelled to speed up the disbursal of funds promised prior to the floods and are likely to increase their commitment of financial support for Pakistan.
Beyond the immediate horizon, maintaining relative political stability will be the key factor influencing the rating. The forbearance of international creditors and further aid should enable the government to overcome the humanitarian and economic setbacks of the disaster, after which tentative steps already taken toward fiscal consolidation can be carried forward. However, an insufficient or mismanaged aid effort could ignite social and political instability, leading to further fiscal slippages and macroeconomic instability. In such circumstances the rating and outlook would be reviewed, with the likelihood of downward movement.
The country's adequate external liquidity position and its earlier success in implementing corrective policy measures to effect some measure of fiscal consolidation in a difficult political environment support the rating. These factors are balanced against fiscal constraints stemming from a narrow revenue base and administrative weaknesses, a high debt and interest burden, and prevailing political and security risks.
Media Contact:
David Wargin, New York (1) 212.438.1579,
[email protected]
Analyst Contacts:
Agost Benard, Singapore (65) 6239-6347
John Chambers, CFA, New York (1) 212-438-7344