May 162008

SINGAPORE/KARACHI: Ratings agency Standard & Poor’s cut Pakistan’s sovereign rating on Thursday, citing increasing pressure from expanding budget and trade deficits against a volatile political setting.

Standard & Poor’s cut Pakistan’s long-term foreign currency debt rating to B from B+ and its long-term local currency rating to BB- from BB. The outlook is negative, S&P said.

“The negative outlook reflects our assessment that the sovereign’s vulnerabilities may accentuate further, given that the emergence of a stable, cohesive and effective physical environment needed to tackle mounting macroeconomic imbalances doesn’t seem to be at hand,” said S&P credit analyst Agost Benard in a statement.

The country’s economic situation has gone downhill. Annual inflation, at more than 17 percent, is at its highest in more than three decades. The current account gap has widened.

Government spending has caused the budget deficit to balloon. The stock market is down 2 percent this year and the rupee has shed 12 percent. reuters

 Posted by at 11:37 am

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