HONG KONG, Dec 19: Standard & Poor’s Ratings Services raised Pakistan’s sovereign rating to CCC-plus from CCC, citing stability in its external financial position after the International Monetary Fund disbursed its first loan tranche.

The outlook is developing, which means the next rating action could be upward or downward.

“The (IMF) disbursal appears to have stabilised the sovereign’s foreign reserve position, substantially alleviating the prospects of near-term debt service stress,” said the rating agency in a statement.

S&P said ratings could be raised if Pakistan is able to meet the targets set by the IMF and is thereby able to get more donor support. But it also said the rating could be cut if there were shortfalls in meeting key fiscal and monetary benchmarks.

“The upgrade was not something that was unexpected,” said Farhan Rizvi, analyst at JS Global Capital Ltd.

“But going forward, Pakistan will have to make sure to meet its targets or we might see a downgrade.” The IMF said Pakistan would aggressively trim its fiscal deficit, halt central bank finance of government spending and curb the country’s current account deficit.

Specifically, the fiscal deficit will be trimmed to 4.2 per cent of GDP in 2008-2009 and 3.3 per cent in 2009-2010, compared with 7.4 per cent in the fiscal year to June 2008.

Average inflation for the 2008-09 fiscal year should be 23 per cent and 13 per cent in 2009-10. Inflation rose 24.68 per cent in November from a year earlier, but slowed from 25 per cent in October.

“The objectives are clear: first, restore overall economic stability and confidence by acting on key macroeconomic imbalances, which means reducing the unsustainably high fiscal deficit and tightening monetary policy to bring down inflation and strengthen foreign exchange reserves,” Masood Ahmed Director of the Middle East and Central Asia said last week.—Reuters