Standard & Poor's also affirmed its 'B-' issue rating on Pakistan's senior unsecured local-currency debt and the transfer and convertibility (T&C) rating of 'B-'.
Likewise, we affirmed the 'B-' issue rating on the sovereign's senior unsecured foreign-currency debt, as well as its recovery rating of 3, which denotes our expectation of a meaningful recovery of 60%-70% in the event of a distressed debt exchange or payment default.
"The ratings affirmation takes into account Pakistan's improved external liquidity position, which was largely due to the International Monetary Fund (IMF) standby loan agreement and other bilateral and multilateral support," said Standard & Poor's credit analyst Agost Benard.
"This credit strength is weighed against the sovereign's high public and external leverage, political and security risks, and fiscal inflexibility due to an exceedingly narrow tax base," he said.
We could lower the ratings if major slippages in policy occur, resulting in renewed balance of payments difficulties or rising public debt trajectory. Conversely, we could raise the ratings if Pakistan is able to sustain its macroeconomic stabilization program and fiscal consolidation efforts—indicated by moderating fiscal deficit and a steady reduction in public debt.
RELATED CRITERIA AND RESEARCH
Sovereign Rating And Country T&C Assessment Histories, published Nov. 1, 2010
Asia Pacific Sovereigns: A Mostly Sunny Outlook, With The Chance Of Isolated Thunderstorms, published Sept. 29, 2010
Sovereign Credit Ratings: A Primer, published May 29, 2008
Complete ratings information is available to RatingsDirect subscribers on the Global Credit Portal at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
Media Contact:
David Wargin, New York (1) 212.438.1579, [email protected]
Analyst Contacts:
Agost Benard, Singapore (65) 6239-6347
Elena Okorotchenko, Singapore (65) 6239-6375