Tokyo, Dec 29: Pakistan’s fiscal position and external balance of payments may be ‘undermined’ if political stability is not restored, said Thomas Byrne, credit analyst for Moody’s Investors Service.

The perceived risk of Pakistan defaulting on its dollar-denominated debt rose to the highest in a month after former Prime Minister Benazir Bhutto was murdered at an election rally on Thursday.

Moody’s rates Pakistan’s debt at B1, four levels below investment grade, with a negative outlook, which indicates that the credit assessor is inclined to lower it.

"Unless political stability is restored, the country’s fiscal position, balance of payments and external balance of payments may be undermined," Byrne said.

"The negative outlook underscores the degree of political uncertainty," the Daily Times quoted him, as saying.

Meanwhile, the sovereign credit ratings on Pakistan (foreign currency B+/Negative/B; local currency BB/Negative/B) could be lowered, if the assassination of Bhutto precipitates heightened levels of violence and political turmoil, Standard & Poor's Ratings Services has said.

The death of Bhutto, one of the main political contenders in the January 8 elections, is a significant blow to Pakistan's transition to democratic rule, and leaves a considerable political vacuum in Pakistani politics, it said.

It, therefore, casts doubts on whether the general elections scheduled for January 8, 2008, will proceed while violent reactions by supporters could potentially spark off escalating civil disorder. (ANI)