Washington: Credit rating agency Standard &
Poor’s has rated Pakistan as B negative, citing the country`s low-income economy, high public and external debt.
Pakistan`s low-income economy, high public and external
debt, structural fiscal weaknesses and significant political
and security risks remain rating constraints, S&P said in a
Observing that Pakistan continues to have donor support
and adequate external liquidity, S&P affirmed the `B-`
long-term and `C` short-term foreign and local currency
sovereign ratings on Pakistan.
"The stable outlook reflects adequate external liquidity, supported by donor commitments," it said.
"The ratings affirmation take into account Pakistan`s low
income level, high public and external leverage, political and
security risks, and fiscal inflexibility due to an exceedingly
narrow tax base," S&P`s credit analyst Agost Benard said.
These constraints are balanced against an adequate
external liquidity position -- largely due to the earlier IMF
standby loan agreement and donor support, Benard said.
"In addition, we affirmed the `B-` issue rating on the
sovereign`s senior unsecured foreign-currency debt, as well as
its recovery rating of `3`, which denotes the expectation of a
meaningful recovery of 50-70 per cent in the event of a
distressed debt exchange or payment default," the credit
rating agency said.
Noting that Pakistan`s high public and external
indebtedness is a rating constraint, S&P said it estimates
Pakistan`s net general government debt at 50 per cent of GDP
in 2011, and about 40 per cent of it is external debt.
Although the debt-to-GDP ratio has fallen from 74 per cent
a decade ago, this was mostly due to debt forgiveness and high
nominal GDP growth due to double-digit inflation in the past
four years, Benard said.