ISLAMABAD: International credit rating agency Moody’s downgraded Pakistan’s sovereign credit rating from B3 to CAA1.
Moody’s has issued a revised rating for Pakistan. According to the statement issued by the Ministry of Finance, the rating action by Moody’s has been strongly contested by the Ministry of Finance as the rating action by Moody’s was unilaterally done without prior consultation and meetings with the teams of the Ministry of Finance and State Bank of Pakistan. done on
The Finance Ministry held two meetings with the Moody’s team in the last 24 hours, sharing data and information that clearly contradicted Moody’s rating action.
The Ministry of Finance, after regularly reviewing economic and financial conditions, would like to state that government policies in the last few months have helped in bringing financial stability. The Government of Pakistan has sufficient liquidity and financing arrangements to meet its external obligations.
Pakistan is currently under the IMF program, the continuation of which is based on verification and confidence in the country’s fiscal discipline, debt sustainability and ability to service all its domestic and external obligations. The country remains committed to the agreements reached under the IMF programme.
Due to gaps in the information available to Moody’s, Moody’s “deterioration in the near- and medium-term economic outlook” does not reflect the true situation and the use of its estimates is not based on fundamental principles.
Thus, the estimate of US$ 30 billion economic cost of the floods is premature as the data is still being compiled in collaboration with the World Bank and other partners to ensure transparency and accuracy. Will be available after confirmation.
Thus, the impact on GDP growth cannot be fully and accurately assessed at this time and hence there is no solid basis for Moody’s revision of the GDP growth rate to 0-1%. . Similarly, the conversion of economic losses into financial losses is countered. On the expenditure front, and that too over several years the government will be involved in massive public infrastructure reconstruction, with immediate increases in current expenditure being met through reallocations and reallocation of budgeted funds. Thus reducing the risk of increasing deficit.
On the revenue front, an increase in nominal GDP is likely to compensate for any decline in revenue. During recent multilateral meetings, the government has received additional funding commitments of over US$2.5 billion from the Asian Development Bank (ADB).
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Similarly, the World Bank has also pledged additional funding of around US$1.3 billion for infrastructure and other projects in the current fiscal year. These are in addition to the Ministry’s financing plan at the beginning of the financial year.
On the appeal of the Secretary General of the United Nations, in the conference held in Geneva on October 4, 2022, the countries have promised to give funds of 816 million US dollars.
Consequently, we expect Pakistan’s liquidity to improve further in November this year as well as the external sector. It is not and is not being implemented as clearly stated by the Finance Minister. Some key numbers can further help in understanding the performance of the economy in the post-flood scenario.
It may be noted that the FBR’s taxes increased by around 28% in September FY23. Its impact is likely to be moderate compared to Moody’s estimates. Commodity prices, particularly crude oil, have eased compared to a month ago, helping to cushion the impact of the floods on the current account deficit.
