Standard & Poor's Ratings Services today affirmed its 'B+' foreign currency and 'BB' local currency long-term ratings and its 'B' short-term sovereign ratings on the Islamic Republic of Pakistan (Pakistan). At the same time, it revised the outlook on the local currency ratings to positive from stable, while affirming the positive outlook on the foreign currency ratings.
"The outlook revision on the local currency ratings to positive from stable is motivated by the government's renewed efforts to finance more of its fiscal gaps through local currency bond issues after a period of suspension," said Standard & Poor's credit analyst Agost Benard. "The resumption of treasury bond auctions, and the extension of the yield curve to 20 years, will benefit domestic capital markets, extend the average maturity of the government's rupee-denominated debt, and will go some way toward alleviating the need for central bank deficit financing."
The ratings on Pakistan take into account its favorable macroeconomic policy environment and improved real GDP growth prospects. "Pakistan's generally prudent economic management and strong policy environment, which over the past several years has consistently focused on structural and institutional reforms, is translating into better growth prospects," noted Mr. Benard.
Trade liberalization and extensive privatization are generating productivity improvements, and attract a rising amount of foreign direct investment, much of it green field. As a result, the country is poised for a period of sustained high growth of around 7% per year, helping to alleviate poverty and make further inroads in debt reduction.
