S&P raises Pakistan ratings to B from B-

Citing improved policymaking resulting in improved macroeconomic stability, global credit rating agency S&P has raised Pakistan's rating to B from B-.

At the same time it affirmed the 'B' short-term rating. The outlook on the long-term rating is stable, the agency said.

Observing that Pakistan continues to benefit from improving governance under its democratically elected government led by Prime Minister Nawaz Sharif, S&P said Pakistan's improved policymaking, in its view, has improved the performance of the economy and the prospects for the country's fiscal and external positions.

As such S&P said it estimates Pakistan's GDP per capita to be USD 1,500 in 2016.
 

It also revised upward its forecast of average annual GDP growth to five per cent over 2016-2019 from its earlier estimate of 4.7 per cent.

This revision reflects improved construction and services sector activity, low-cost oil and finance, and high investment associated with the China-Pakistan Economic Corridor (CPEC).

S&P said a now completed three-year reform program, supported by an Extended Fund Facility (EFF) arrangement with the International Monetary Fund (IMF), has further helped to restore macroeconomic stability, reduce fiscal and external vulnerabilities, and promote growth-supporting reforms that have the potential to improve living standards.

At the same time the rating agency said many of Pakistan's structural weaknesses remain: a narrow tax base, as well as domestic and external security risks, that weaken the government's effectiveness and weigh on the business climate.

"Notwithstanding the recent terrorist attacks in Quetta, however, we see even these structural weaknesses as having improved over the past few years. Combined, these factors motivated the upgrade," it said.

"We are raising our long-term sovereign credit ratings on Pakistan to 'B' from 'B-', and affirming our 'B' short-term sovereign rating. The outlook on the long-term rating is stable," the rating agency said.

"The stable outlook balances the potential benefits of the government's reform efforts in bolstering Pakistan's fiscal and external buffers against the risks that the reform program stalls or domestic security deteriorates during the next 12 months," it said.