S&P affirms Pakistan's long-term rating 'stable'

21/11/2014 07:04 AST

Standard and Poor's (S&P) Rating Services has affirmed 'B-' long-term and 'B' short-term sovereign credit ratings on Pakistan, adding that the outlook on the long-term rating is "stable", said a press release by the agency on Thursday.

"Pakistan's political landscape is more stable than that a few years ago."

The agency said the increase in the country's foreign exchange reserves in recent months has tempered external liquidity risk.

"We expect Pakistan's usable foreign exchange reserves to cover about two months current account payments at the end of FY15, up from 1.5 months at the end of FY14, assuming timely disbursements under the IMF's lending programme and a strengthening inflow of foreign direct investments."

"We believe the country's low income level will remain a rating constraint. With per capita GDP at $1,500 in FY15, the government has a low revenue base on which to draw."

Power shortages remain serious, despite the government's energy sector strategy to increase electricity supply. The business environment and perceptions of government administrative inefficiency hampers investment and job growth in the formal economy, said the agency.

The agency expects the government's fiscal consolidation efforts to lower its deficit (inclusive of grant) to 3.4 per cent of GDP in FY17 from 8pc in FY13, after having cut the deficit to 5 per cent in FY14.

"With inflation likely hovering above 6pc over the next three years, the State Bank of Pakistan has only limited room to support the economy with monetary easing when necessary."

Meanwhile, Pakistan logged a 28.5 per cent rise in current account deficit to $1.759 billion during the first four months of 2014/15 fiscal year over the same period last year, mainly because of widening trade deficit.

The current account deficit was recorded at $1.368 billion in July-October last fiscal year.

Accounting for 1.8 per cent of GDP, the current account deficit was, however, below the expectation, analysts said on Thursday.

They said the soft international oil prices gave some respite.

The Gulf Today