Thaw in Indo-Pak ties to benefit nations: S&P

S&P rates Pakistan’s foreign currency at ‘‘B+’’ with ‘‘stable’’ outlook and local currency at ‘‘BB’’ with ‘‘stable’’ outlook while India enjoys a higher rating of ‘‘BB+’’ with ‘‘stable’’ outlook.

For India, S&P said ‘‘The benefits are clearly more on the political side, rather than economic.’’ Although there would be tangible gains from increased trade with Pakistan and easier access to Iranian gas, these would be less significant to India because of the comparative size of India’s economy over Pakistan.

Listing out three major benefits to Pakistan, S&P said the improvement in ties would reduce its military expenditure which could be channelised in social sector. This would help Pakistan attain better fiscal balance and reduce debt burden. Better ties would boost cross-border trade and investment, it said.

The risk of war has constrained Pakistan’s sovereign credit rating, impairing its access to foreign capital. Its defence expenditure averaged 25 per cent of total expenditure, or 4.5 per cent of GDP, over the past eight years. This has dwarfed its development funding, which averaged 13.6 per cent of expenditure.

The hostility has also undermined the effectiveness of the Saarc and has delayed creation of SAFTA, it said.