ISLAMABAD (AP) — Pakistan has contested a downgrading of its rating by Moody’s Investors Service, insisting it has adequate reserves and financing to pay back foreign debt despite the worst flooding in its history.
Such downgrades tend to shake the confidence of investors because the action is seen as a warning that Pakistan is more likely to default on its foreign debts.
Pakistan’s angry reaction comes a day after Moody’s revised Pakistan’s sovereign credit rating by one notch to the still-high credit risk status of Caa1 from B3, citing the impoverished nation’s decreasing foreign exchange reserves facing Pakistan’s economy in the bruising aftermath of the deadly floods. The deluge killed 1,700 people, left half a million homeless and cost some $30 billion.
The Finance Ministry in a strongly-worded statement said the “rating action by Moody’s is strongly contested” as it was carried out without consultations with the ministry or the country’s central bank.
The ministry said it was sharing information with Moody’s and is urging the service to reverse the downgrade.
Multiple medical and other risks facing a half-million flood survivors prompted the United Nations to raise it’s demand for humanitarian aid for Pakistan to $816 million from $160 million. The Finance Ministry said it expects more funding from “multilateral and friendly countries” during a conference in November.