Standard & Poor's, a division of McGraw-Hill that publishes financial research and analysis on stocks and bonds, said Pakistan's credit rating could be lowered if the political unrest continues and escalates after the country’s former Prime Minister Benazir Bhutto was assassinated yesterday.

Standard & Poor's, one of the top three companies in this business, along with Moody's and Fitch Ratings, said that the wave of violence triggered in Pakistan by the Bhutto’s assassination will most likely cause a decline in foreign direct investment and capital inflows, and that the Pakistani government may have difficulty refinancing debt.

"A further weakening of Pakistan's institutions, in conjunction with rising levels of violence and disorder, and the postponement of the Jan. 8 elections would lead to a rating downgrade. A prolonged political stalemate or social disorder would make the rating vulnerable,'' said S&P in its statement.

Last month, the company had changed its outlook regarding Pakistan from “stable” to “negative” after President Pervez Musharraf suspended the constitution and imposed emergency rule. Pakistan’s debt has a B+ foreign-currency rating which is four levels below investment grade.

The negative outlook on the ratings on Pakistan summarizes the risks affecting the political process and this includes attempts on the life of political leaders.

Moody's Investors Service has a similar outlook on Pakistan's credit rating and ranks its debt at B1, four levels below investment grade.

Thomas Byrne, credit analyst for Mody’s, underlined the fact that Pakistan’s fiscal position, balance of payments and external balance of payments may be undermined if the political unrest persists.

Bhutto’s assassination casts doubts on whether the general elections scheduled for January 8, 2008, will be carried out and the civil disorder caused by the tragic event will most likely give a significant blow to Pakistan's transition to democratic rule

It therefore casts doubts on scheduled will proceed, while violent reactions by supporters could potentially spark escalating civil disorder.