* Sovereign ratings were lowered in May 2008
* Government bond ratings were cut to B2 from B1
By Sajid Chaudhry
ISLAMABAD: Moody’s International, a reputed international credit rating agency would review the strategy and policy direction of the new government, for addressing the current political as well as economic challenges, for possible change in the country’s credit rating, official sources told Daily Times on Saturday.
The government has good plan for economic consolidation, in its first year, however, political uncertainties and law and order situation are the issues that are out of control of the government till date, said the sources.
A high-level review mission of Moody’s International would hold review of country’s economic and political situation during August 5 to August 6 for possible review and determination of the country’s credit rating afresh.
“Delay in resolving the political issues is leading to uncertainties in the country and may have negative impact on future credit rating,” the sources mentioned.
A review mission of Moody’s International would hold discussions with Pakistan’s economic managers and high ups in the government to evaluate the challenges faced by the country and the strategy to resolve these issues, the official added.
The prevailing political uncertainties, law and order situation on Pakistan’s borders as well within the country along with economic difficulties are likely to have negative effects on fresh credit rating to be determined by the rating agency.
The review would focus on the strategy the new government has in hand to address the political as well as economic challenges and its possible outcome in near future. If the policy and strategy of the present government were found workable during the review than a positive rating can be expected.
Political uncertainties i.e. judges issue, rift in coalition partners on different important issues and law and order situation in Federally Administered Tribal Areas as well in Swat are now having effects on country’s economy. On the other hand growing domestic and external debt, falling foreign exchange reserves, exports, growing budget deficit, current account deficit and external balance of payments are the challenges that require government’s attention.
According to the official sources, the review of the economic situation of the country will mainly focus on what steps the government has in hand to control growing budget deficit. Keeping the budget deficit at sustainable level is important for improvement in country’s credit rating. It will also be evaluated whether the efforts of the government for containing the budget deficit at 4.7 percent of the projected Gross Domestic Product (GDP) of the country are viable or not.
Moody’s Investors Service had lowered Pakistan’s sovereign ratings in May 2008.
Moody’s cut its government bond ratings to B2 from B1, or five levels below investment-grade, citing its concerns over the country’s fiscal position and economic policies in a volatile political environment.
Improvement in country’s credit rating could help regain investor’s confidence, especially the foreign investors, as the government has already delayed the launch of its sovereign bonds in the international financial markets.
Source: Daily Times, 3/8/2008