Moodys to retain negative rating of Pakistan

A Moodys Investors Services report has said that it would retain its negative outlook of Pakistans B1 ratings until the two main parties have demonstrated an ability to restore political stability.

Singapore, Feb 26 : A Moody's Investors Services report has said that it would retain its negative outlook of Pakistan's B1 ratings until the two main parties have demonstrated an ability to restore political stability.

The credit rating analysis firm had changed the outlook of Pakistan's B1 sovereign bond ratings to negative in the immediate aftermath of the imposition of emergency rule in November.

Vice Chairman Aninda Mitra said the Pakistan People's Party (PPP) and the Pakistan Muslim League-Nawaz's history of "animosity with ideological differences" could negatively affect the performance of a new coalition government.

He said the new government's actions would have to improve economic activity, and boost domestic business and investor sentiment to support a change in the ratings outlook from negative to stable.

"The most serious credit challenge would probably arise from ... further political infighting, coupled with policy drift and worsening inflation and fiscal fundamentals that could further worsen macroeconomic as well as socio-political stability," he added.

The B1 ratings outlook was changed to negative directly after the imposition of emergency.

"At that time, we believed that the suspension of the rule of law had systemically heightened political uncertainty, making stable political outcomes unforeseeable," said Mitra.

"Such high levels of political uncertainty and institutional opacity could affect confidence-sensitive investment flows and generally worsen macroeconomic stability," the Dawn quoted Mitra, as saying.

The subsequent assassination of Benazir Bhutto and the accompanying violence demonstrated the high level of political uncertainty that were of concern to Moody's, he said.

ANI