Business | Economy
Pakistan credit rating suffers under Moody's
Moody's cut Pakistan's credit rating by one level to B3 and warned of further cuts as Germany said it would help Pakistan negotiate a deal with the International Monetary Fund (IMF).
- Reuters
- Published: 23:31 October 28, 2008
- Image Credit: EPA
- People shout slogans during a protest against inflation in Lahore yesterday. Pakistan is currently suffering inflation of more than 25 per cent and a widening current account deficit of more than $14 billion.
Karachi/Hong Kong: Moody's cut Pakistan's credit rating by one level to B3 on Tuesday and warned of further cuts as Germany said it would help Pakistan negotiate a deal with the International Monetary Fund (IMF).
Pakistan is facing a balance-of-payments crisis and has just a few weeks to raise billions of dollars in foreign loans needed to keep meet debt payments and pay for imports.
The seven-month-old government running Pakistan after more than eight years under former army chief Pervez Musharraf has been reluctant to go to the IMF and has been looking for help from friendly governments.
But little assistance has materialised.
Moody's retained a negative outlook which it had imposed last month after Pakistan's rapidly deteriorating external liquidity position accompanied a stalling of economic reforms and domestic political turmoil.
Aninda Mitra, Moody's sovereign analyst for Pakistan, said recent policy moves were not sufficient to staunch the decline in its foreign currency pile, which was further hastened by delays in assistance from key bilateral and multilateral creditors.
"The failure to obtain timely assistance from Saudi Arabia, China, the US and other friends, and delays in disbursements from the World Bank, have eroded investor confidence and resulted in a substantial drawdown of Pakistan's foreign currency reserves," he said.
Traders said the markets had already priced in yesterday's downgrade and any further reduction from Moody's.
This month, rival rating agency Standard & Poor's Ratings Services cut Pakistan's rating to CCC-plus, one notch below Moody's. S&P has retained the negative outlook.
The rupee and stocks were flat following the ratings downgrade.
Negotiation: Germany to help
Germany said om Tuesday it would help Pakistan in negotiating a deal with the International Monetary Fund (IMF) and hoped an agreement could be reached soon to help Pakistan out of its economic difficulties. Visiting German Foreign Minister Frank-Walter Steinmeier held talks on Tuesday with Pakistani President Asif Ali Zardari and Foreign Minister Shah Mahmoud Qureshi and said both had told him Pakistan would not be able to move ahead without IMF help.
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