International rating agencies are preparing to rate the risk on government debt for the first time in preparation for a Eurobond issue by the government. The rating is expected to be below investment grade, bankers say.

Moody’s Investors Service of the UK and the US’ Standard & Poor’s Ratings Group visited Pakistan in late May and early June to assess the risk for private investors to buy government debt. Bankers say they expect a single B grade. This would mean that ‘assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small,’ according to Moody’s rating definition.

The move is understood to be in anticipation of the government’s first short-term debt sale on the international market, planned for July. Government officials have confirmed a Eurobond issue is planned but have declined to give details. The issue is to convert an estimated $200 million of short-term into long-term debt.