Standard & Poor's cut Pakistan's sovereign rating further into junk territory, saying the country's worsening external liquidity may imperil its ability to meet about $3 billion in upcoming debt obligations. S&P lowered Pakistan's foreign currency debt rating to CCC-plus from B, just several notches above a level that would indicate default. Pakistan's local currency debt rating was lowered to B-minus from BB-minus.
The widely expected action comes after Pakistan said on Saturday its foreign reserves fell $690 million to $8.1 billion in the week ending on September 27, an announcement that helped send the Pakistani rupee to a record low against the dollar on Monday. The State Bank of Pakistan said its reserves fell to $4.7 billion from $5.4 billion previously, representing a little over two months of import cover.
S&P's downgrade of Pakistan was its second this year. The ratings agency noted Pakistan would require external assistance in meeting its debt obligations -- which includes $500 million in dollar bonds maturing in February -- but expressed concern about whether it could count on the help in time.
S&P also noted the uncertain political situation and social tension cast doubt about whether the government would have the ability to adopt the appropriate policy measures. "The rating on Pakistan could be lowered further if the foreign exchange reserve cushion continues to shrink and meaningful economic stabilisation measures remain wanting," S&P warned in its statement. |