Standard & Poor's assigns 'BB-' to three PIBs

SINGAPORE (November 15 2003): Standard & Poor's Ratings Services on Friday assigned its 'BB-' long-term local currency debt rating to three Pakistan Investment Bonds totalling Rs 28 billion ($479 million) that were issued on November 6, 2003 by the Government of Pakistan.

These newly rated bonds carry coupon rates of 6 percent, 7 percent, and 8 percent, and mature in November 2006, 2008, and 2013, respectively.

Standard & Poor's sovereign credit ratings on Pakistan are: foreign currency 'B/B' and local currency 'BB-/B'. The outlook on the long-term sovereign ratings is stable.

“The ratings on Pakistan are supported by its comfortable external liquidity position, and progress made in economic stabilisation,” said Standard & Poor's sovereign credit analyst, Chih Wai Liew.

Foreign exchange reserves have risen to more than $ 10 billion at the end of October 2003, and are expected to continue rising in the coming months.

At the same time, relations with official creditors, including the US, have remained on an even keel.

The structural reform agenda has also remained broadly on track.

In October 2003, the government tabled its long-awaited Fiscal Responsibility and Debt Limitation Bill in parliament for approval.

The passage of this bill is a positive step as it would enhance government's fiscal accountability, and confer parliamentary support for the government's debt reduction strategy.

In addition, the government has increased the pace of its privatisation programme in recent months. Particularly noteworthy is the invitation to potential investors to acquire up to 73 percent of the equity in the Karachi Electric Supply Corp (KESC), one of the two main state-owned utilities that are draining the government's financial resources.

Furthermore, the government is continuing to pursue fiscal consolidation and is aiming to narrow its federal government deficit (excluding foreign grants) to 4 percent of GDP for the current fiscal year (ending June 30, 2004), down from the estimated 4.6 percent of GDP deficit for fiscal year 2003.

Nevertheless, Pakistan's twin debt burdens of net general government debt and net public external debt, at above 90 percent of GDP and 120 percent of current account receipts, continue to be among the highest of all sovereigns rated by Standard & Poor's, and constrain Pakistan's credit standing.

New ratings assigned to Pakistan Investment Bonds as follows: Rs 5.9 billion 6 percent due November 6, 2006, 'BB-'; RS 10.1 billion 7 percent due November 5, 2008, 'BB-'; Rs 11.5 billion 8 percent due November 5, 2013, 'BB-'.

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