SINGAPORE, Nov 5: Moody’s Investors Service is reviewing Pakistan’s ratings and will assess the ensuing developments after Pakistan President Pervez Musharraf declared emergency rule in the country, a senior analyst at the ratings firm said on Monday.

The latest development is “quite exceptional and really unexpected,” Aninda Mitra, Moody’s lead analyst for Pakistan, said in a telephone interview.

Musharraf over the weekend suspended the constitution, in what he claimed was a move in response to rising Islamic militancy and political instability caused by an interfering judiciary. He consolidated his grip on the courts, media and political opposition by blackening private domestic and international television channels, replacing several Supreme Court justices, and detaining about 500 political opponents and human-rights activists.

The move is expected to spur a negative reaction in the country’s financial markets.

Pakistan’s 5-year credit default swaps - insurance-like contracts against credit defaults and a key indicator of investor sentiment in the country - are expected to widen out 50-100 basis points from around 350 basis points after Musharraf’s declaration, according to Lehman Brothers.

Moody’s rates Pakistan B1 while Standard & Poor’s Ratings Services ranks the south Asian nation B+, both with a stable outlook. “The ratings of Pakistan have always been under review given how turbulent the situation has been,” Mitra said. He said Moody’s will want to see what the broader implications of the political developments might have on the sovereign ratings.

US Secretary of State Condoleezza Rice has said that the US would review its financial aid to Pakistan, which has amounted to more than $10 billion over the past five years. A breakdown in Pakistan’s alliance with the US is among the factors that could bring the country’s credit ratings down.

He said a withdrawal of military support from the US could be a risk that the ratings firm has to watch out for. — Dow Jones