ECONOMICS: Sanctions on India, Pakistan
Far Eastern Economic Review
Sept 10, 1998
Taking a Hit
By Salil Tripathi
The economic sanctions imposed
on India and Pakistan after their
nuclear tests in May have forced both nations to implement desperate
measures: But India will come out better because of its stronger
As a measure of their standing, Moody's gives India's debt a
sovereign rating of Ba2 -- none too sparkling, but several notches
higher than Pakistan's B3, now shared with Indonesia.
Since 1991, India has relied less on loans from abroad and more on
overseas investment. Pakistan's vulnerability is greater because it
remains dependent on borrowing and has a much weaker external position.
Moreover, in August, India raised $4.1 billion in a bond issue
to nonresident Indians. The Resurgent India Bonds, brought to market by
the State Bank of India, raised more than the amount of aid it lost
after economic sanctions were imposed. The bonds offered interest of
7.75%, at least two percentage points higher than India would have paid
the World Bank.