ISLAMABAD: Finance Minister Ishaq Dar, while assuaging the fears over Investors Service’s downgrading of Pakistan’s rating, has asked people not to worry about it as the rating is more relevant for the issuance of Sukuk Bonds. He added he has asked the credit rating agency to reverse ranking or be prepared for a befitting response.
These remarks came after Moody’s downgraded Pakistan’s credit rating to Caa1 from B3 and kept the outlook negative, as the government’s dollar requirement for financing a widening current account deficit and the risk to sustain debt increased in the wake of recent devastating floods.
Talking to the media, Dar termed the rating “unilateral” and “not truly reflective” of the current macroeconomic conditions. He said he had spoken to the agency’s officials and told them that they “should not have done it”. He said he had asked Moody’s to “make room” for Pakistan, and assured that “otherwise” 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,” the finance minister said. 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.
The Ministry of Finance (MoF) also released a statement saying that Moody’s worsening near- and medium-term economic outlook does not depict the correct picture due to gaps in the information available to the agency and its use of estimations is not grounded in fundamentals. “Ministry of Finance strongly contests Moody’s unilateral rating action as no prior consultation/meetings were held as is required. Pakistan is currently under the IMF program, the continuity of which is based on the confirmation and confidence in the country’s ability to maintain fiscal discipline, debt sustainability, and its ability to discharge all its domestic and external liabilities,” the MoF statement read.
“Moody’s numbers on economic losses and GDP growth rates are based on estimates, Government of Pakistan is still in the process of compiling data in collaboration with the World Bank. The CAD has witnessed a decline over the year and we expect our liquidity position to improve further as the additional funding commitments by our multilateral and bilateral partners in the wake of floods begin pouring,” the MoF added further.