ISLAMABAD: Finance Minister Ishaq Dar warned Moody’s Investor Service on Friday that he would give a “befitting” reply in a meeting with its officials next week if the agency did not reverse the downgrade of Pakistan’s sovereign credit rating.
“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.
A day earlier, Moody’s cut Pakistan’s sovereign credit rating by one notch to Caa1 from B3, citing increased government liquidity and external vulnerability risks, following the devastating floods that hit the country earlier this year.
“The outlook remains negative,” said the New York-based rating agency, adding that the floods had exacerbated Pakistan’s liquidity and external credit weaknesses and vastly increased social spending needs, while government revenue is severely hit.
Debt affordability, a long-standing credit weakness for Pakistan, will remain extremely weak for the foreseeable future. The downgrade has pushed the country into the C-category after seven years, i.e. March 2015.
Talking outside an accountability court in Islamabad today, Dar said he had spoken to the agency’s officials and told them that they “should not have done it”.
Moody’s should have consulted Pakistan prior to the downgrade, the finance minister said, adding that there was “no cause for worry” as rating agency Fitch had also downgraded the United Kingdom earlier this week.
“The main work of these rating agencies is related to bonds. We floated $500 million bonds in April 2014 and we had 14 times oversubscription.
“We have given our response. I have worked in international organisations too. It was impossible for them (Moody’s) to undo [the downgrade],” he acknowledged, but reiterated that he would give a “befitting response” to the agency.
Ratings cut
Moody’s said its Caa1 rating reflected its view that Pakistan will remain highly reliant on financing from multilateral partners and other official sector creditors to meet its debt payments, in the absence of access to market financing at affordable costs.
It expected Pakistan’s ongoing IMF programme to remain in place and provide an avenue for financing from the lender and other multilateral and bilateral partners in the near term.
Moody’s said Pakistan’s weak institutions and governance strength added to the uncertainty whether the country will maintain a credible policy path that supports further financing. The negative outlook also captures risks that, should a debt restructuring be needed, it may extend to private sector creditors.
Arrest warrant gets cancelled
An arrest warrant issued against Finance Minister Ishaq Dar in the assets beyond means case filed against him by the National Accountability Bureau (NAB) was cancelled by an accountability court Friday morning.
Two weeks back, accountability court judge Mohammad Bashir had suspended till October 7 the arrest warrant — issued on December 11, 2017 — in the assets beyond means case. The warrant was issued after Dar continuously failed to appear before a trial court due to his prolonged stay in London.
The court had, however, said at the last hearing that the warrant would be cancelled permanently if Dar appeared before it in person.
On Friday, the court also directed the minister to submit surety bonds of Rs1 million.