ISLAMABAD: A ratings downgrade by Moody’s agency was not a cause for concern, Finance Minister Ishaq Dar said on Friday but added that he had told the agency he would give a “befitting” response in a meeting with its officials next week if it did not reverse the decision.
“There’s no need to worry (ghabrayein nahi),” he told reporters outside an Islamabad accountability court, which cancelled his arrest warrant in an assets-beyond-means case.
The minister said the ratings were only relevant when a country was seeking to tap the global debt market, and Pakistan was not planning to issue any such instruments at the moment. “We first have to fix our economic indicators,” he said.
Moody’s cut Pakistan’s sovereign credit rating on Thursday by one notch further into junk territory to Caa1 from B3. It cited increased government liquidity and external vulnerability risks in the wake of floods in August that killed nearly 1,700 people and caused billions of dollars in damage.
Mr Dar, who returned to Pakistan last month after a court suspended his arrest warrant, told the media he would give a proper answer for each reasoning on which the New York-based agency rated the country.
He said Moody’s officials “have to meet me” and that “I told them if you don’t [reverse] this, I will give you a befitting response in our meeting next week”.
The senior PML-N leader explained that there are three rating agencies in the world — Moody’s Investors Service, S&P Global Ratings and Fitch Ratings — and one of them, Fitch, had also recently downgraded the UK’s credit rating.
Mr Dar also insisted that it might be hard for Moody’s to reverse its decision since a country’s ratings were not changed in a day and must be in the works for months.
“It was impossible for them to undo that [the downgrade decision],” he said, adding that he told the agency to “make room” for Pakistan, otherwise he would seek answers in the upcoming meeting.
The finance ministry also issued a statement on Thursday after Moody’s downgrade, saying the rating action “was carried out unilaterally without prior consultations and meetings with our teams from the Ministry of Finance and State Bank of Pakistan”.
“Ministry of Finance strongly feels that the downgrading of Pakistan’s rating is not truly reflective of Pakistan’s macroeconomic conditions,” it said.
Ratings outlooks
Despite Pakistan’s protestations, market watchers believe more downgrades could be coming.
“Other rating agencies may also think of downgrading Pakistan if they believe that getting dollar financing will be an issue at a time when Pakistan is suffering from after-effects of floods,” Topline Securities Chief Executive Muhammad Sohail told Reuters news agency.
In June, Moody’s affirmed Pakistan’s B3 rating but changed its outlook from stable to negative. The decision was followed by outlook downgrades in July by Fitch and S&P, both of whom flagged similar issues.
Fitch and S&P Global had affirmed Pakistan’s Long-Term Foreign-Currency (LTFC) at “B-”. Fitch has had Pakistan on B- since December 2018, when it downgraded the country from a B rating.
The next significant policy event facing Pakistan after the rating action is a meeting of the central bank’s monetary policy committee, which convenes on Monday to decide on the key policy rate.
Court cancels Dar’s arrest warrant
Meanwhile, an Islamabad accountability court on Friday cancelled Mr Dar’s perpetual arrest warrant, issued in May, in an assets-beyond-means case.
Mr Dar, who was declared an absconder in the case in 2017 after he failed to join the corruption trial, is now under no obligation to seek pre-arrest bail from the court as it allowed him to deposit Rs1 million as surety bonds.
The court also issued notice to the National Accountability Bureau (NAB) on Mr Dar’s applications seeking exemption from personal appearance and attachment of his properties.
During the hearing, the prosecution informed accountability court judge Mohammad Bashir that the NAB chairman had issued the arrest warrants when Mr Dar was an absconder. He said the court had already suspended these warrants of Sept 23.
Mr Dar’s counsel, Misbahul Hassan Qazi, argued that since the senior PML-N leader had already surrendered before the court and was ready to face the trial, the arrest warrant might be cancelled. The next hearing is set for Oct 12.
Published in Dawn, October 8th, 2022
