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http://www.dawn.com/2006/08/22/ebr2.htm
S&P hints at lowering Pakistan credit rating
By Khaleeq Kiani
ISLAMABAD, Aug 21: The Singapore-based Standard & Poorââ¬â¢s Ratings Services has hinted at removing the log-term positive outlook from Pakistan's credit rating owing to domestic political and economic risks and emerging regional situation, it is learnt.
A senior official told Dawn on Monday that State Bank of Pakistan Governor Dr Shamshad Akhtar had informed the federal government about negative signals coming from S&P that clearly indicated a downward revision of Pakistanââ¬â¢s credit rating that was upgraded from "stable" to "positive outlook" in December last year.
ââ¬ÅS&P analysts have been exchanging data with the central bank for a quite some time now but there is no deadline for the review as such,ââ¬Â the official said.
He said the central bank chief wrote to the federal government last week of a looming downgrading of the country's credit rating by S&P and its possible fallout on overall economy that had already been showing signs of imbalance. The SBP chief asked the finance ministry to immediately take up the matter with the prime minister to use his good offices in this regard.
Advisor to the finance ministry on economic affairs Dr Ashfaq Hassan Khan when contacted said a team of Standard & Poor's would be visiting Pakistan for discussions before finalising any revision. He said it was a very complicated process and a team of S&P analysts would review a number of things and analyse data and then present its findings to a committee.
He said he was not aware when the S&P team would visit
Pakistan and replied in negative when asked if S&P had informed the government about possible downward revision in credit rating.
Many economists have been talking about rising macroeconomic imbalances in the country, including last year's slowdown in economy and highest-ever trade and current account deficits at about $12 billion and $5 billion, respectively, and higher debt costs could ultimately make a large dent in Pakistanââ¬â¢s foreign exchange reserves.
Sources said uncertain political future in Pakistan before run-up to the elections, souring relations with India, border situation on the western side and emerging situation in the Middle East and its spill-over to the region, besides economic indicators, could be the basis for a downward revision in credit rating.
Standard & Poor's revised its credit rating on Pakistan to ââ¬Åpositiveââ¬Â from ââ¬Åstableââ¬Â in December last year, citing improvements in external debt indicators. The rating agency had then affirmed its current 'B+' foreign currency and 'BB' local currency long-term and its 'B' short-term sovereign ratings assigned to Pakistan.
Pakistan's trade deficit widened by 70.58 per cent to $1.239 billion in the first month of the fiscal year 2006-07 as against $726.936 million in the same month last year, as oil prices hit a new height in the international market.
http://www.dawn.com/2006/08/22/ebr1.htm
Low credit off-take may affect GDP growth: Manufacturing sector
By Shahid Iqbal
KARACHI, Aug 21: Private sector credit off-take by the major sectors such as textile and communication has started declining which may make it difficult for the country to achieve 7 per cent economic growth target for the ongoing fiscal year.
Bankers said that the textile and communication sectors were not consuming credit the way they did last year. However, no bank has any data to assess the level of lower outflow of credit towards the manufacturing sector.
Bankers said that the credit outflow towards the textile and communication sectors had already slowed down from last year mainly because of lesser requirement for their expansion plans.
During July-March 2006 textile sector borrowed Rs69bn compared to Rs95bn in the corresponding period of last year, according to Economic Survey 2005-06.
ââ¬ÅThe slower credit off-take was because shrinking demand of the textile and telecommunication sectors as they consumed maximum for expansion plans,ââ¬Â said Abid, a researcher.
ââ¬ÅIn FY2005 newly operated cellular companies borrowed heavily in order to start their operations and this phenomenon was not present during FY06.
The Economic Survey stated that during July-March 2005-06, communication sector (defined as transport, storage and communication) borrowed Rs5.7bn as compared to Rs20.8bn previously,ââ¬Â said Mohammad Imran, another researcher.
The bankers said that the major manufacturing sector would borrow less than previous year as they had been operating at the highest capacity level.
Installed capacity of cement sector is 20.94 million tons while the utilised capacity is 18.4 million tons. Fertilizer is working with 100 per cent installed capacity of 4.96 million tons.
Auto sector is also reaching at the optimum level as its capacity is 222,000 units per year and it is manufacturing 192,000 units.
ââ¬ÅUnless new expansion starts, the credit outflow would remain low,ââ¬Â said a banker, adding that it would help the State Bank to keep the monetary growth within target.
Bankers do not believe that the higher lending rates were the reason for slower credit growth.
The production data also showed that the growth in both these sectors had come down. According to official data during July-March 2005-06, the textile sector, which has a weight of 24.4pc in the large-scale manufacturing sector, posted a growth of just 3.89 per cent.
Bankers and analysts said that tightening of monetary policy would not hurt the outflow of credit towards the manufacturing sector despite the interest rate hike.
The State Bank announced to keep tight monetary policy for July-December 2006 to bring down the inflation at 6.5 per cent.
The same policy was followed during fiscal 2005-06 but the credit off-take by the private sector reached Rs401 billion and monetary growth breached the target of 12.8 per cent.
The State Bank also increased the treasury bills rate and discount rate was increased by 50 basis points to 9.50 per cent.
This was a clear indication of higher interest rate, but the bankers said that demand was slowing down and the higher lending rates were not the reason for slow credit growth to textile or telecommunication sector.
ââ¬ÅThe fiscal year has just started and the trend will take at least two to three months to appear more visible, however, the manufacturing sector performance may remain below expectation and that would hurt the economic growth.ââ¬Â said Abid.
The government has set 7 per cent GDP growth target for the ongoing fiscal year and is relying mostly on services and industrial sectors growth.
S&P hints at lowering Pakistan credit rating
By Khaleeq Kiani
ISLAMABAD, Aug 21: The Singapore-based Standard & Poorââ¬â¢s Ratings Services has hinted at removing the log-term positive outlook from Pakistan's credit rating owing to domestic political and economic risks and emerging regional situation, it is learnt.
A senior official told Dawn on Monday that State Bank of Pakistan Governor Dr Shamshad Akhtar had informed the federal government about negative signals coming from S&P that clearly indicated a downward revision of Pakistanââ¬â¢s credit rating that was upgraded from "stable" to "positive outlook" in December last year.
ââ¬ÅS&P analysts have been exchanging data with the central bank for a quite some time now but there is no deadline for the review as such,ââ¬Â the official said.
He said the central bank chief wrote to the federal government last week of a looming downgrading of the country's credit rating by S&P and its possible fallout on overall economy that had already been showing signs of imbalance. The SBP chief asked the finance ministry to immediately take up the matter with the prime minister to use his good offices in this regard.
Advisor to the finance ministry on economic affairs Dr Ashfaq Hassan Khan when contacted said a team of Standard & Poor's would be visiting Pakistan for discussions before finalising any revision. He said it was a very complicated process and a team of S&P analysts would review a number of things and analyse data and then present its findings to a committee.
He said he was not aware when the S&P team would visit
Pakistan and replied in negative when asked if S&P had informed the government about possible downward revision in credit rating.
Many economists have been talking about rising macroeconomic imbalances in the country, including last year's slowdown in economy and highest-ever trade and current account deficits at about $12 billion and $5 billion, respectively, and higher debt costs could ultimately make a large dent in Pakistanââ¬â¢s foreign exchange reserves.
Sources said uncertain political future in Pakistan before run-up to the elections, souring relations with India, border situation on the western side and emerging situation in the Middle East and its spill-over to the region, besides economic indicators, could be the basis for a downward revision in credit rating.
Standard & Poor's revised its credit rating on Pakistan to ââ¬Åpositiveââ¬Â from ââ¬Åstableââ¬Â in December last year, citing improvements in external debt indicators. The rating agency had then affirmed its current 'B+' foreign currency and 'BB' local currency long-term and its 'B' short-term sovereign ratings assigned to Pakistan.
Pakistan's trade deficit widened by 70.58 per cent to $1.239 billion in the first month of the fiscal year 2006-07 as against $726.936 million in the same month last year, as oil prices hit a new height in the international market.
http://www.dawn.com/2006/08/22/ebr1.htm
Low credit off-take may affect GDP growth: Manufacturing sector
By Shahid Iqbal
KARACHI, Aug 21: Private sector credit off-take by the major sectors such as textile and communication has started declining which may make it difficult for the country to achieve 7 per cent economic growth target for the ongoing fiscal year.
Bankers said that the textile and communication sectors were not consuming credit the way they did last year. However, no bank has any data to assess the level of lower outflow of credit towards the manufacturing sector.
Bankers said that the credit outflow towards the textile and communication sectors had already slowed down from last year mainly because of lesser requirement for their expansion plans.
During July-March 2006 textile sector borrowed Rs69bn compared to Rs95bn in the corresponding period of last year, according to Economic Survey 2005-06.
ââ¬ÅThe slower credit off-take was because shrinking demand of the textile and telecommunication sectors as they consumed maximum for expansion plans,ââ¬Â said Abid, a researcher.
ââ¬ÅIn FY2005 newly operated cellular companies borrowed heavily in order to start their operations and this phenomenon was not present during FY06.
The Economic Survey stated that during July-March 2005-06, communication sector (defined as transport, storage and communication) borrowed Rs5.7bn as compared to Rs20.8bn previously,ââ¬Â said Mohammad Imran, another researcher.
The bankers said that the major manufacturing sector would borrow less than previous year as they had been operating at the highest capacity level.
Installed capacity of cement sector is 20.94 million tons while the utilised capacity is 18.4 million tons. Fertilizer is working with 100 per cent installed capacity of 4.96 million tons.
Auto sector is also reaching at the optimum level as its capacity is 222,000 units per year and it is manufacturing 192,000 units.
ââ¬ÅUnless new expansion starts, the credit outflow would remain low,ââ¬Â said a banker, adding that it would help the State Bank to keep the monetary growth within target.
Bankers do not believe that the higher lending rates were the reason for slower credit growth.
The production data also showed that the growth in both these sectors had come down. According to official data during July-March 2005-06, the textile sector, which has a weight of 24.4pc in the large-scale manufacturing sector, posted a growth of just 3.89 per cent.
Bankers and analysts said that tightening of monetary policy would not hurt the outflow of credit towards the manufacturing sector despite the interest rate hike.
The State Bank announced to keep tight monetary policy for July-December 2006 to bring down the inflation at 6.5 per cent.
The same policy was followed during fiscal 2005-06 but the credit off-take by the private sector reached Rs401 billion and monetary growth breached the target of 12.8 per cent.
The State Bank also increased the treasury bills rate and discount rate was increased by 50 basis points to 9.50 per cent.
This was a clear indication of higher interest rate, but the bankers said that demand was slowing down and the higher lending rates were not the reason for slow credit growth to textile or telecommunication sector.
ââ¬ÅThe fiscal year has just started and the trend will take at least two to three months to appear more visible, however, the manufacturing sector performance may remain below expectation and that would hurt the economic growth.ââ¬Â said Abid.
The government has set 7 per cent GDP growth target for the ongoing fiscal year and is relying mostly on services and industrial sectors growth.
