S&P: Pakistan Sovereign Ratings Affirmed; Outlook Revised to Negative

    SINGAPORE, Nov. 6 /PRNewswire/ -- Standard & Poor's Ratings Services
 today revised its outlook on the long-term foreign and local currency
 sovereign credit ratings of the Islamic Republic of Pakistan (Pakistan) to
 negative from stable. At the same time, Standard & Poor's has affirmed its
 'B+/B' foreign currency and 'BB/B' local currency sovereign credit ratings
 on the republic.
     "The outlook revision reflects heightened and prolonged political
 uncertainty after President Pervez Musharraf's declaration on the state of
 emergency on Nov. 3, 2007, and its potential impact on economic growth,
 fiscal performance, and external vulnerability," said Standard & Poor's
 credit analyst Agost Benard.
     The sovereign's political and security situation has deteriorated
 markedly in recent months. Before declaring a state of emergency, President
 Musharraf was undergoing what many perceived to be the most severe
 challenge to his authority since he came to power eight years ago.
     This period of increased uncertainty has been marked by violent social
 unrest relating to the removal of the country's chief justice, the Red
 Mosque siege in Islamabad, and the assassination attempts on the
 president's life.
     "With the declaration of the state of emergency, the political turmoil
 and security concerns reached new highs, and prospect of swift political
 resolution became more distant," Mr. Benard said. "The negative outlook
 reflects the likelihood of a downgrade if the current political turmoil
 results in economic policy setbacks, in weaker economic and fiscal
 performance, or in higher external debt and debt service burdens. The
 outlook could be revised to stable if political pressures ease and the
 government is able to focus effectively its efforts on fiscal consolidation
 and further economic reform."
     The expansionary stance of the 2007-2008 budget has led to heightened
 concerns over the country's fiscal position, which remains vulnerable given
 the government's high debt and debt-service burdens. Recent events
 exacerbate the risk of expenditure overruns and revenue shortfalls, thereby
 increasing the risk of exceeding the 4% deficit target.
     In addition to potential fiscal impact, the political turmoil exposes
 the sovereign to external pressures if foreign direct investments and other
 equity inflows, which have funded about two-thirds of the country's large
 current account deficit (estimated at just under 20% of current account
 receipts in fiscal 2006-2007), diminish significantly.
     Complete ratings information is available to subscribers of
 RatingsDirect, the real-time Web-based source for Standard & Poor's credit
 ratings, research, and risk analysis, at www.ratingsdirect.com.
     All ratings affected by this rating action can be found on Standard &
 Poor's public Web site at www.standardandpoors.com; select your preferred
 country or region, then Ratings in the left navigation bar, followed by
 Credit Ratings Search.
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SOURCE Standard & Poor's