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EDITIONS
Tuesday, 30 October, 2001, 16:40 GMT
Pakistan ratings upgraded
Pakistani soldier
Domestic problems could be the biggest risk to Pakistan's economy
The ratings agency Moody's Investor Services has upgraded Pakistan's sovereign ratings to stable from negative.

Analysts said the move was made because of what are thought to be improved prospects for debt relief in light of the Pakistani government's support in the US-led war on terrorism.

The United States said it would support billions of dollars worth of new loans and aid from the International Monetary Fund (IMF).

There is also growing optimism that Pakistan will get generous terms for rescheduling its debt with the Paris Club - a club of rich states which lend money to less developed countries.

"They will be getting terms usually given to poorer countries," David Levey, managing director of sovereign risk at Moody's told the BBC's World Business Report.

Dr Raithin Roy, economist at the London's School of Oriental and African studies, told the BBC's World Business Report: "Rescheduling I think was agreed before the ground offensive started and when the Pakistan government's acquiescence to participate in this coalition was sought.

He added: "The capacity of Pakistan to almost not default is actually very large...I don't think anyone is prepared to have a nation of 140 million people in the Middle East default on debt."

Brighter future?

Pakistan's need for help has soared recently because the attacks on Afghanistan have disrupted regional economic prospects.

But since agreeing to cooperate with the US in its war against terrorism, Pakistan has seen Washington lift sanctions imposed after nuclear tests in 1998, grant $100m in aid and reschedule $379m of bilateral debt.

The White House is expected to announce an additional $500m in aid for Pakistan as early as next week.

Mr Levey said that there should also be some action taken to remove taxes and tariffs on some of Pakistan's exports.

Pakistan's ratings upgrade leaves it above Argentina and below Turkey in investor perceptions of the risks involved in financial dealings with the country.

But Mr Levey still recognises that Pakistan faces problems.

"Because there are still high risks due to the domestic political situation, Pakistan remains on a low rating," he said.

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 ON THIS STORY
David Levey, Moody's Investor Services
"Access to foreign currency will allow a brighter outlook."
Dr Raithin Roy, SOAS
"The capacity of Pakistan to almost not default is very large"
See also:

23 Sep 01 | Business
14 Aug 01 | Business
29 Oct 01 | Business
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