Dar Threatens Moody’s if Pakistan’s Downgrade is Not Reversed

Finance Minister Ishaq Dar has “threatened” Moody’s Investors Service after the rating agency downgraded Pakistan’s local and foreign currency issuer and senior unsecured debt ratings.

In a conversation with reporters on Friday, the country’s Finance Minister stated that he informed Moody’s that if the agency did not reverse its decision, he would respond in a “befitting” manner in his meeting with the agency’s officials 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.

He added, “There is no need to be concerned. I spoke with Moody’s yesterday and told them that they should not have done this. They should have consulted with us”.

This comes after the Ministry of Finance on Thursday questioned the rating action in which the agency downgraded Pakistan’s sovereign credit ratings. In a statement, the ministry said Moody’s “worsening near- and medium-term economic outlook” does not depict the correct picture due to gaps in the information available with Moody’s, and its use of estimations is not grounded in fundamentals.

It added that the downgrading of Pakistan’s rating is not truly reflective of Pakistan’s macroeconomic conditions.

The rating agency stated that its decision to downgrade Pakistan’s sovereign credit ratings was largely driven by increased government liquidity and external vulnerability risks and higher debt sustainability risks, in the aftermath of devastating floods that hit the country since June 2022.

In view of the downgrade, Moody’s lowered Pakistan’s local and foreign currency country ceilings to B2 and Caa1 from B1 and B3 as the outlook remains negative. The two-notch gap between the local currency ceiling and sovereign rating is driven by the government’s relatively large footprint in the economy, weak institutions, and relatively high political and external vulnerability risk.

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