07/10/2008
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Debt crisis looms larger after rating slash
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ISLAMABAD: The risk that Pakistan could become the bankrupt state as it was before a military coup nine years ago loomed larger on Monday as the rupee struck an all-time low and the country’s debt was relegated deeper into junk bond territory.
The six months old civilian government led by President Asif Ali Zardari is engulfed with crises left behind by former army chief General Pervez Musharraf, who resigned as president in August.
"The Pakistani authorities now need to demonstrate that the financing gap in the balance of payments is capable of being bridged," said Tim Condon, economist at ING Bank in Singapore. An adviser to Prime Minister Yousuf Raza Gilani said last week that $3-4 billion was needed fast to stabilise the economy.
The constant pressure to pay import bills and meet debt payments has drained liquidity and forced the government to borrow more from the central bank.
Data released on Monday showed government borrowing was more than 100 per cent up at $2.21 billion - all of it from the central bank - in the first 11 weeks of a fiscal year that began on July 1, compared with year-ago levels. - Reuters
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