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Capital Intelligence ups Pakistan's long-term and short-term ratings

ISLAMABAD (December 20 2002) : Capital Intelligence (CI), the international emerging markets rating agency, has raised Pakistan's long-term sovereign rating to B- (minus) from C and its short-term sovereign rating to B from C.

The upgrades are due to the marked improvement in Pakistan's external finances, and the authorities' adoption of a comprehensive programme of structural reforms, says a press release issued by the CI here on Thursday.

According to CI, the liquidity problem that confronted the country in the late 1990s has been resolved due to substantial debt relief from the Paris Club (in December 2000) and the success of measures to funnel a larger proportion of workers remittances through formal channels.

The strengthening of the balance of payments position has permitted the rapid accumulation of official foreign exchange reserves to $6.9 billion in early-December 2002 from $1.7 billion in June 2001.

Reserves fully cover external debt falling due in the coming year and provide the authorities with a comfortable cushion with which to absorb any unanticipated shocks in the short term.

The authorities have also increased efforts to tackle structural imbalances in the economy.

Fiscal consolidation is taking place, the tax system is being slowly reformed, steps have been taken to improve the financial health of key loss-making state enterprises, and tangible progress has been made in moving towards a policy regime more supportive of international trade.-APP

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