THE policy makers seem unruffled by the risks of downgrading of Pakistan’s credit worthiness by the Moody’s and the Standard and Poor’s Ratings Services and the threat of suspension of foreign aid over the proclamation of state of emergency in the country.

Officials are sure that the political uncertainty spawned by the emergency which has angered the donor states would not last long. Still they think it wise to prepare a contingency plan to face the situation if the threat materialises and foreign investors lose confidence.

”I am not a pessimist, and believe that no sooner than President Musharraf takes oath of his office for the next term, three-fourths of this uncertainty will be gone,” a confident Special Secretary Ministry of Finance, Dr Ashfaque Hasan Khan said.

“Even if Canada and the Netherlands withdraw $10 million and $7 million assistance, it will not make much difference,” he told Dawn.

He said the situation was not all that bad on the economic front as no bilateral donor or any international financial institution has so far officially communicated any thing to the government with regard to the suspension of their assistance as was widely publicised in the press.

When asked to comment on the possible negative impact of observations by the Moody’s International and the Standard and Poor’s, the two New York-based international credit rating agencies, he said: “You must know that there was no down grading, as our investment rating remains B-Plus and B-1 by the Standard and Poor’s and the Moody’s international respectively. Therefore, there is no change in it and as such it does not warrant any wake up call.

“The change is in their future outlook which according to them is not stable and is negative due to the political uncertainty,” Dr Khan, who is also the spokesman for the ministry of finance, said.

He was of the view that it was a short-term phenomenon and was not expected to last long. Dr Khan said that this emergency imposed by Gen Musharraf was different from that of 90’s when assemblies were dissolved and governments dismissed and the whole thing was torn apart. “But today every thing is intact as the federal and provincial governments are functioning and the assemblies are performing their duties due to which investor’s confidence is still very much there across Pakistan”.

He said Gen Musharraf’s emergency was soft and benign compared to those of the previous ones and as such would not bring any big harm to the economy.

Responding to a question, the special secretary said that Pakistan’s foreign reserves were over $16 billion and were sufficient for six months’ imports compared to two weeks of imports of 1999 when the government of former prime minister Nawaz Sharif’s was removed. The stock market which was down by 635 points on Monday last had also started recovering, he added.

“We should also know that Monday’s crash was not primarily due to rumours against President Musharraf but was due to loss of $13 billion of the Citigroup global on account of subprime market crisis. And this happened in most of the countries on the same day (Monday) when stock market went down by 1,526 points in Hong Kong alone”.

Similarly, he said, there had been decline of five per cent, 1.14 per cent, two per cent, 1.6 per cent, 1.5 per cent, 1.2 percent in Indonesia, India, Australia, Japan, Singapore and the United States respectively. In Pakistan the decline was 4.57 per cent due to which investors lost their Rs186 billion.

He said Karachi Stock Exchange had initially registered a decline of about 200 points which reached to 635 points when rumours were targeted against President Musharraf. But it had started picking up with the increase of 147 points and 70 points on Tuesday and Wednesday of last week.

Dr Khan said that Pak rupee remained stable at Rs60 plus against dollar and did not touch Rs100 as many had predicted.

To another question, he said the decision of promulgating the state of emergency had not affected the country’s production nor was there any decline in foreign direct investment (FDI).

When asked what worried him the most with regard to the imposition of the state of emergency, he said: “If this emergency persists and continues indefinitely, then I will be very concerned”. But then he hastened to add, “believe me this is going to be a short- term phenomena and the situation will soon return to normal”.

To a question, he conceded that privatisation had already witnessed some slow down and perhaps the new government would be doing some thing about it. About the privatisation of Pakistan State Oil (PSO), he said this transaction was delayed first when the Supreme Court had taken suo motu notice. Later, the armed forces also expressed their concern about it. Dr Khan, nevertheless, said that the GDR of the National Bank would now be taken up in the third quarter of the current financial year.

Chief Economist of ABN Amro Bank Saqib Sherani, when approached, said that he did not see any problem to the economy in the short-term. But if the emergency prolonged then it would have wide spread impact on investors’ confidence. The situation, he said, was that of wait and see for the investors and that they were looking into the future scenario of the country.

However, he said if there was an increased street protest, and international pressure mounted, then there would be serious negative impact on the economy. The situation was already not good because of the delay in the privatisation of the PSO and in the GDR of the National Bank, he added.

“Also, since August this year what is happening in the global financial market is causing problem to every country”, he said hoping that the emergency would be lifted soon and elections held on schedule to avoid any big problem to the economy.

Former director of the Pakistan Institute of Development Economists (PIDE), Dr A. R. Kamal, termed the down grading by the Moody’s International and the Standard and Poor’s as a “serious issue” which he believed should not go unnoticed.

He said stock markets had been provided some institutional support to recover from the shock of Monday’s crash. But if the uncertainty was not removed immediately, things would go serious on the economic front. Dr Kamal said issues concerning investment and privatisation were needed to be taken seriously. “And then we will have to ensure that our production does not go down failing which we will miss our growth target set for 2007-08”, he said.

Dr Kamal said the government needed to come up with clear stand on various political issues specially the elections so that things did not go out of hand.