Govt Recasts Ministries, Shuffles Secretaries

International credit-rating agency Standard & Poors (S&P) sees a stable outlook in credit quality throughout the Asia-Pacific region.

Effective economic policies of Asia's emerging market governments, financial restructuring and a positive shift in balance of payment flows support a stable outlook for nine of the 12 economies in the region, according to a S&P statement.

Last month, S&P reaffirmed India's foreign currency rating at BB and local currency rating at BBB with a stable outlook.

"Interest rates and inflation are declining, exchange rates are stable and prospects for economic recovery are improving in a range of countries," S&P managing director, sovereign ratings, David Beers said.

"Policy-makers now seem to be rebuilding credibility by pursuing economic programs with greater consistency and determination," Beers said. He also expected political backing for sound economic policies continue to grow.

Progress in restructuring financial systems, the weaknesses of which were at the heart of the 1998-99 crisis, was another factor supporting the credit standing of these economies.

In combination with financial restructuring in the private sector and sustained foreign direct investment flows, the large trade and current account surpluses of these economies have helped boost central bank reserves, reduce short term debt and external balance sheets, he added.

He, however, expressed concerns with regard to the cost of industrial and banking sector reforms in China and the government's capacity to implement them.

"Exchange controls and substantial foreign exchange reserves helped shelter China from the worst of Asia's financial contagion but could prove to be effective if domestic confidence in the banking system begins to unravel," Beers said.

The risk of a confidence crisis in China was real as the pace of business activity slows, owing to the continued lack of financial transparency and high domestic leverage, he said.

"A related concern is the possible linkage between weaker economic conditions and rising social tensions, which could cause the leadership's commitment to reform to falter," he added. r=black face=arial size=2>

The 11.68 per cent gilt maturing in 2006 traded in the band of Rs 100.93-100.99 and was the most actively traded. Dealers said that government securities prices will be range-bound today.