Pakistan Gets Higher Credit Ratings

International credit rating agencies Moody's and Standard and Poor have both raised Pakistan's credit rating and outlook, according to Bloomberg News.

S&P increased its rating on Pakistan’s long-term sovereign debt to B- from CCC+, six levels below investment grade and the same ranking as the Ukraine and Argentina. The outlook was maintained as stable.

“The upgrade reflects Pakistan’s improved external liquidity position, coupled with its successes in implementing corrective policy measures to rectify an unsustainable fiscal trajectory,” S&P said in a statement. “A narrowing current account deficit, helped by buoyant remittance inflows, and successive disbursals of the IMF and other multilateral loans have reduced the risk of near-term external payment difficulties for Pakistan,” S&P added.

Moody’s rates Pakistan’s foreign debt at B3, six levels below investment grade and the same ranking as Argentina and Bolivia. The country’s local-currency bonds are rated by Moody’s at the same level. India's credit ratings (BBB-/Negative/A-3) are higher than Pakistan's but the ratings may be lowered because of concerns about its rising fiscal deficit of 6.8% of GDP announced in the 2009-10 Budget.

After losing 41% of its value in fiscal 2008-09, the KSE-100 has begun to rebound. The investors returning to the Karachi stocks have pushed the KSE-100 up 43% so far this calender year, up from 6295 points at the end of 2008 to 9030 level yesterday. While it pales in comparison with Mumbai's stock gains of 63%, the KSE's 43% gain is close to the MSCI emerging market index performance of 48% for 2009 so far.

During 2008, Pakistan's foreign currency reserves rapidly declined, economic growth stalled, and the ability to borrow additional cash was impaired when the nation's credit rating was cut by the rating agencies. S&P cut Pakistan's sovereign debt rating from B+, four notches below investment grade, as did Moody's from B1 with a negative outlook, for the first time in nine years, citing "growing economic imbalances and renewed political difficulties."

The signs of an economic rebound in Pakistan are visible today, bringing new investors and businesses to Pakistan. A lot now depends on whether the PPP government lets Mr. Shaukat Tareen, the current finance minister and former Prime Minister Shaukat Aziz's protege, guide the economy forward without undue political interference potentially detrimental to the recovery effort.

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With Washington on an unprecedented spending spree to stimulate the economy, President Barack Obama has repeatedly promised unprecedented transparency. "Instead of politicians doling out money behind closed doors, the important decisions about where taxpayer dollars are invested will be yours to scrutinize," the President said in a video announcing the opening of the site called recovery.gov.

While polls indicate that most Americans support their new president in his sincere efforts to revive the US economy, it is clear that President Obama is up against the massive power of Washington's corrupt political-industrial elite that has brought American economy near collapse. And many of the same people are still in charge on the Hill.

As the stimulus package is getting the nod from the US Congress, the lobbyists on K-street say that their phones are ringing off the hook. "There was this unique opportunity that government was handing out money and anytime that happens, companies will spend what they must to get in line to get a piece of the pie", said Sheila Krumholz, Executive Director of Center for Responsive Politics in a report aired on NPR Radio today.

Washington lobbyists earned a whopping $3.2 billion last year. That's the highest amount in the decade tracked by the nonpartisan watchdog group's Sheila Krumholz. She said interest groups spent $17.4 million on lobbying every day Congress was in session last year. And with Washington on a spending spree, companies are boosting their influence on Capitol Hill.

The situation is no different on Wall Street, one of the largest contributors to the powerful politicians in America. Despite crippling losses, multibillion-dollar bailouts and the passing of some of the most prominent names in the business, employees at financial companies in New York, the now-diminished world capital of capital, collected an estimated $18.4 billion in bonuses for the year, according to a recent report in the New York Times.

That was the sixth-largest haul on record, according to a report released Wednesday by the New York State comptroller.

Massive loss of confidence in many of the US public and private institutions is largely responsible for the current global economic crisis of historic proportions. It is in the best interest of America's political-industrial elite to reform themselves in the larger interest of the nation and the world. I hope our new popular new president can get the people on the Hill as well as those on Wall Street and K Street to behave themselves in their own best interest. To accomplish this challenging task, Obama should be willing to risk going directly to the people, over the heads of the Congressmen, including his fellow Democrats, early and often to maintain his own credibility with the people.

Here is an Obama video clip promising complete transparency:



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