Islamabad, Dec 28: The assassination of former
Pakistan Prime Minister Benazir Bhutto could adversely impact
Foreign Direct Investment (FDI) and capital inflows into the
country, global rating agency Standard and Poors said today.
The killing would also make it difficult for Pakistan to
refinance external and domestic debts since the risk aversion
of lenders would be on the rise, the agency said in a report.
FDI and portfolio flows would likely decline, negatively
affecting Pakistan's external liquidity position, given its
large current account deficit of about 4.8% of GDP, it
said.
According to S&P, fiscal slippages may also arise pushing
deficits beyond the government's targeted 4 per cent of GDP
and jeopardize the favorable debt trajectory.
Terming that Bhutto's death is a significant blow to
Pakistan's transition to democracy, the agency said a
prolonged political stalemate or social disorder would make
the ratings vulnerable.
The assassination in itself will not result in a rating
action, it said. However, a further weakening of Pakistan's
institutions, in conjunction with rising levels of violence
and disorder and the postponement of January 8 elections would
lead to a rating downgrade, S&P said.
Currently, the agency has a negative outlook on
Pakistan's credit worthiness after it was downgraded from
stable following the imposition of emergency last month.
The report noted that the prevailing negative outlook on
Pakistan encapsulates to a large extent risks to the political
process, including attempts on the life of political leaders
after a number of such incidents in past.
Meanwhile, Moody's investors service is also having a
negative outlook on the country's credit rating.
Bureau Report
First Published: Friday, December 28, 2007, 00:00