Moody’s Investors Service cut Pakistan’s local and foreign currency issuer and senior unsecured debt ratings, prompting Finance Minister Ishaq Dar to “threaten” the rating company.
The nation’s Finance Minister said in a talk with reporters on Friday that he informed Moody’s that if the rating agency did not change its judgement, he would reply in a “befitting” manner in his meeting with agency representatives next week.
“They [Moody’s officials] have to meet me. I told them if you don’t [reverse] this, I will give you a befitting response in our meeting next week,” he said.
There is no reason to worry, he continued. Yesterday, I spoke with Moody’s and advised them against doing this. They ought to have sought advice from us.
The agency’s decision to reduce Pakistan’s sovereign credit ratings was questioned by the Ministry of Finance on Thursday. The ministry claimed in a statement that Moody’s “worsening near- and medium-term economic forecast” is inaccurate since Moody’s lacks some pieces of information and uses estimates that are not based on facts.
It further stated that the rating downgrade of Pakistan is not accurately representative of Pakistan’s macroeconomic circumstances.
In the wake of the devastating floods that have struck the nation since June 2022, the rating agency stated that its decision to downgrade Pakistan’s sovereign credit ratings was primarily motivated by increased government liquidity and external vulnerability risks as well as higher debt sustainability risks.
Moody’s downgraded Pakistan’s local and foreign currency nation limits from B1 and B3 to B2 and Caa1 as a result of the downgrade since the outlook is still bleak. The government’s comparatively significant economic footprint, inadequate institutions, and comparatively high political and external vulnerability risk are the main causes of the two notch difference between the local currency ceiling and sovereign rating.
To read our blog on “Pakistan’s fiscal growth will slacken in FY23 due to Economic and Political uncertainty, Moody’s,” click here.
