Can't connect right now! retry

add The News to homescreen

tap to bring up your browser menu and select 'Add to homescreen' to pin the The News web app

Got it!

add The News to homescreen

tap to bring up your browser menu and select 'Add to homescreen' to pin the The News web app

Got it!

Standard & Poor’s revises Pakistan’s rating to positive


May 6, 2015

KARACHI: Standard & Poor’s Ratings Services on Tuesday revised its outlook on the Pakistan’s long-term sovereign credit rating to positive from stable and also affirmed its ‘B-’ long-term and ‘B’ short-term sovereign credit ratings on the country.
“The positive outlook reflects our expectations of Pakistan’s improved economic growth prospects, fiscal and external performances, and the supportive relationship of external donors over the next 12 months,” the US financial services company said in a statement.
It said the improvement on the fiscal front helped the country offset the impact of weak infrastructure, security risks and other limitations.
“The ratings reflect vulnerabilities in Pakistan’s institutional and governance effectiveness that are partly associated with the country’s security risks…low income, weak monetary policy framework, and shortfalls in infrastructure and services that have historically been negative to its fiscal performance,” it said. “These factors are offset by gains in Pakistan’s economic, fiscal, and external performance.”
However, the S&P’s expressed its optimism over the growing income level and economic output in the years to come. It forecasts 4.3 percent increase in GDP per capita to around $1,460 this year from 5.4 percent in 2014.
“We have revised our 2015/17 average real GDP growth projections for Pakistan to 4.6 percent, from 3.8 percent previously, reflecting strong capital inflows and remittances, and lower oil prices, which support business confidence and investment spending,” it said. “We project growth of GDP per capita over 2015/19 to average 2.6 percent, reflecting the sound outlooks for the agriculture and construction sectors (in spite of recent floods).
Though inflation was tamed, the economy is likely to reel under pressures from the energy crisis, weak business environment and fragile infrastructure, it said.
“We expect inflation to average 4.8

percent over 2015/19.”
The researcher was surprised over the reduction in fiscal deficit, “which exceeded our expectations for 2014 with the general government deficit now estimated at 4.5 percent of GDP in 2015 compared with our earlier forecast of 5.5 percent.”It is expecting fiscal consolidation of another one percent of GDP over 2015/16 if the government broadens tax base, reduces tax concessions, improves compliance and lowers subsidies and salaries in public sector.
“We forecast Pakistan’s fiscal deficits to average 3.5 percent of GDP over 2016-2019, and the net general government debt burden to fall to 50.5 percent of GDP by 2019 (from 57 percent in 2015) as the deficit shrinks,” the statement said.
“In line with the falling debt stock and cost of borrowing, we expect Pakistan’s interest costs will approach 25.5 percent of general government revenues in 2019, from an estimated 30.6 percent in 2015.”
The financial firm predicted that the current account deficit will shrink on improving foreign exchange reserves position ($11.6 billion as of March 2015 versus $6 billion in 2012/13).
“We estimate the current account deficit declined to 1.2 percent of GDP in 2014, partly reflecting lower oil prices, and we expect it to average about 2 percent over 2015-2019,” it said. “We expect Pakistan’s external debt burden to remain moderate, with narrow net external debt averaging 73.4 percent over 2015-2019.”
S&P’s conditioned an increase in ratings on Pakistan in future with better-than-expected GDP growth rate, drop in government debt and rise in foreign reserves.
However, “We may revise the outlook back to stable if Pakistan’s economic, fiscal, and external performance weakens again,” it warned.

Topstory minus plus

Opinion minus plus

Newspost minus plus

Editorial minus plus

National minus plus

World minus plus

Sports minus plus

Business minus plus

Karachi minus plus

Lahore minus plus

Islamabad minus plus

Peshawar minus plus