Another feather in the cap of economic managers of Pak … first Economist report and now S&P raised credit rating outlook from stable to positive
S&P Follows Moody’s to Raise Pakistan Outlook as Growth Quickens
by Faseeh Mangi
12:04 AM PDT
May 5, 2015
Standard & Poor’s raised Pakistan’s credit rating outlook to positive from stable, as lower energy costs and an IMF loan boost growth and improve finances.
“The positive outlook reflects our expectations of Pakistan’s improved economic growth prospects, fiscal and external performance, and the supportive relationship of external donors over the next 12 months,” the company said in a statement on Tuesday.
It affirmed its B- rating, which is among the so-called junk grades, and raised the 2015-2017 average growth projection to 4.6 percent from 3.8 percent. Risks include higher oil prices, weakness in key trading partners and violence, S&P said.
The move follows a similar step by Moody’s Investors Service in March as Prime Minister Nawaz Sharif looks to resolve Pakistan’s crippling power shortages and boost investment. The nation’s foreign exchange reserves have almost doubled to $12.6 billion with the help of an International Monetary Fund loan and its stocks are among Asia’s best performers this quarter.
“Foreign inflows can be expected in the country and more dollars would mean more economic stability,” Saad Khan, an economist at Arif Habib Ltd. said by phone from Karachi after the upgrade.
The benchmark KSE 100 index has risen** 10.7 percent **this quarter, trailing only Chinese and Hong Kong equities, according to data compiled by Bloomberg. The gauge fell 0.8 percent as of 12:24 p.m. in Karachi on Tuesday and Pakistan’s rupee was little changed.
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China Pledge**
China pledged $45 billion for roads, ports and power plants when President Xi Jinping visited Pakistan last month. The planned investment, 28 times more than the foreign direct investment Pakistan received in year ended June, will spur investment activity and help ease the country’s growing energy shortage, Moody’s said in a report on Monday.
Pakistan took a $6.6 billion loan from the IMF in 2013 to avert a balance-of-payments crisis and has cleared six program reviews. Oil prices have fallen 38 percent over the past year, lowering Pakistan’s import bill, easing price pressures and giving the central bank room to cut interest rates.
S&P forecasts Pakistan will report an average budget deficit of **3.5 percent of gross domestic product **during **2016-2019 with interest costs falling to about 25.5 percent of revenues from an estimated 30.6 percent in 2015.
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Inflation is expected to average 4.8 percent over 2015-2019.
