LONDON, Nov 27: Standard & Poor’s said on Tuesday that Pakistan, embroiled in political turmoil, was at a turning point and the outcome of the ongoing political transition will have a bearing on the country’s ‘B+’ sovereign rating.

The agency said Pakistan’s credit ratings could be eroded by continued instability or regression into an ineffectual administration under an elected government.

“Fiscal slippages may arise, jeopardising the currently favourable debt trajectory,” S&P credit analyst Agost Benard said in a statement.

“Foreign currency inflows could also be affected, thus hurting Pakistan’s external liquidity position. The other notable risk is that economic growth could also suffer,” he added.

S&P cut the outlook on Pakistan’s sovereign rating to negative after President Pervez Musharraf declared a state of emergency on November 3 this year. But it said economic fundamentals were strong enough to withstand a period of uncertainty without a material decline in credit quality.

Parliament elections have been called for January 8 after Musharraf saw his popularity plummet since March when he fired an independent minded senior judge and declared a state of emergency.

Analysts say a likely outcome is a hung parliament which could usher in a period of further uncertainty. The country’s economy has boomed in recent years, growing at over 6 per cent a year.

Rival agency Moody’s rates Pakistan ‘B1’.—Reuters