RAD Federation: Moody's ups Pak rating

Moody's ups Pak rating
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Super Administrator on 19 August, 2009 12:59:00
 
Pakistans credit rating outlook was lifted to stable from negative by Moodys
Investors Service on Monday, which quoted an increased IMF loan.
Moodys upgraded Pakistans rating from B3 with negative outlook to B3 with
stable outlook.
Moodys cited greater financial assistance from the IMF and subsequent lowering
of potential risks to BoP stability from any drop in private capital inflows as
the reason for the rating upgrade.
This action is in line with the expectations given by several experts.
However, despite the improvement in the rating outlook, Pakistans credit
rating is still lower than that for most other economies in the region where
respective long term sovereign rating for Hungary and Turkey are Baa1 and Ba3.
Considering that Pakistans broad economic fundamentals are comparable and in
some cases even better than these two economies, we expect further upward
revision in Pakistans rating if political risks remain manageable, said Asad
Farid at AKD Securities.
In addition, experts expect official loan and aid flows to increase further
going forward considering that the next FoDP summit in Turkey will be
co-chaired by President Obama, Prime Minister Brown and President Zardari. This
should keep both the fiscal and the external side balanced and at the same time
contribute towards reserve buildup.
Moreover, the IMF aid would help to maintain foreign currency reserve adequacy
against the risks of further deceleration in private capital flows, said an
expert. The loan will also help the country obtain bilateral assistance.
The IMF has increased Pakistans loan package to US$ 11.2 b, approving an
additional US$ 3.2 b to help revive countrys economy. Recently, the central
banks benchmark interest rate was cut to 13 percent from 14 percent to aid
growth.
A stable outlook will help Pakistan in raising debt overseas, if it decides to
tap international markets. The changed outlook will have a positive impact on
the stock market and may encourage foreign investment in Pakistan, said a
stock expert.
Overseas direct investment in Pakistan fell 42 percent in July from a year
earlier to $200 million, according to data from the central bank.