ISLAMABAD, Dec 12: Pakistan’s long-term foreign currency sovereign credit rating has been raised to B from B- while the long-term local currency sovereign credit rating has been raised to BB- from B+ by Standard and Poor’s Rating Services.

Standard and Poor’s (S&P) says outlook for both long-term ratings is stable. At the same time, the rating agency has reaffirmed its B short-term local and foreign sovereign credit ratings on Pakistan.

The upgrades of rating by Standard and Poor’s reflects Pakistan’s improved external liquidity position which in turn stemmed from the government successful debt negotiation under the Paris Club and the central bank’s achievements in capturing a greater share of workers remittances which are likely to cross $3 billion mark by the end of current financial year.

Prime Minister’s Adviser on Finance and Economic Affairs Shaukat Aziz said the improved credit rating was an endorsement of financial and structural reforms being pursued by the government. It would also improve Pakistan’s credibility with the investors, fund managers, credit rating agencies and bilateral donors.

Further, the improved credit rating would increase investment in Pakistan and generate economic activity. According to Dow Jones, Pakistan’s gross external financing requirement is projected to decline to about 40 per cent of the reserves by the fiscal year 2002-03 from 389 per cent of the reserves by fiscal year end 2001-02.

The Paris Club enabled Pakistan to reschedule $12.5 billion bilateral debt. The entire debt stock was rescheduled for 35 years with gross period of 15 years. Achievements in structural reform also underpinned the upgrade. Wide-ranging reforms — including trade liberalization, energy sector deregulation, privatization of public enterprises, banking sector restructuring, and tax reforms — has helped the economy to grow 4.4 per cent in the year 2002, despite a difficult political and economic environment, and a third successive year of drought.

The upgrade will reduce Pakistan’s risk premiums, thus resulting in lower cost of foreign borrowings by public and private sector.

Responding to a question, Mr Shaukat said the new credit rating would certainly help attract new foreign investment.

He agreed that foreign investment was one of the grey areas which needed to be addressed effectively. “But this new rating, I am sure, will help us attract foreign investment,” he said, adding that a number of multilateral companies were already involved in Pakistan and in some cases they were increasing their investment. “But our target is to have more investment from the United States, Europe, Middle East as well as Japan,” Mr Shaukat said.