S&P: Pakistan at risk

Standard & Poor's said that the appointment of Raza Gilani as prime minister of a newly elected coalition government draws a line under a period of heightened political turbulence in Pakistan (foreign currency B+/negative/B, local currency BB/negative/B).

With a democratically elected parliament and a coalition cabinet in place, the immediate political risks have eased considerably, particularly given the absence of any disputes over the election results in February, the agency said.

Yet, it is also clear that this new constellation of political forces poses a number of risks, S&P said, adding that the incoming administration faces the considerable challenge of arresting growing fiscal and external imbalances against deteriorating external conditions, a task Prime Minister Gilani may prove ill-equipped to handle, given an untested and potentially fractious cabinet.

"The immediate and potentially largest distraction for policymakers is whether to reinstate Supreme Court judges sacked by President Pervez Musharraf during the state of emergency in 2007, which is ultimately connected to the fate of the Musharraf presidency, which many consider to be unconstitutional," said S&P credit analyst Agost Benard.

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