ISLAMABAD: Pakistan has reacted strongly over a recent rating released by Moody’s that downgraded the sovereign credit rating from B3 to Caa1.
A statement issued by the Finance Ministry on Friday said the rating action by Moody’s is strongly contested [by the Ministry of Finance] as the rating action by Moody’s was carried out unilaterally without prior consultations and meetings with teams from the Ministry of Finance and State Bank of Pakistan.
Read More: Moody’s downgrades Pakistan’s rating to Caa1
Pakistan is currently under the IMF Programme, the continuity of which is based on the confirmation and confidence in the country’s ability to maintain the fiscal discipline, debt sustainability, and its ability to discharge all its domestic and external liabilities.
The country remains committed to the agreements reached under IMF program, it said, adding that Moody’s “worsening near- and medium-term economic outlook” does not depict the correct picture due to gaps in the information available with Moody’s and its use of estimations is not grounded in fundamentals. As such, the estimate of the economic cost of the floods at US$ 30 billion is premature as the data is still being compiled in collaboration with World Bank and other partners, to ensure transparency and accuracy, and will be available once the figures are firmed up. Thus, the impact on GDP growth rate cannot be fully and accurately assessed at this time and so Moody’s downward revision of GDP growth rate at 0-1% has no solid basis.
Similarly, translating economic losses into fiscal deficits is contested. On the expenditure front, government will largely be involved in public infrastructure rebuilding, and that too, over a number of years. The uptick in urgent current expenditure is being met through re-allocations and re-appropriations of budgeted funds thus mitigating the risk of rising deficit. On the revenue front, the increase in nominal GDP is likely to compensate for any dip in revenues.
During recent meetings with multilateral, the government has received additional funding commitments from ADB of over US$ 2.5 billion. Similarly, World Bank has also pledged additional funding of around USS 1.3 billion for infrastructure and other projects in the current financial year.
These are in addition to the Ministry’s financing plan at the start of the financial (On the appeal of UN Secretary-General, funds to the tune of US$ 816 million were pledged by countries in a conference in Geneva on October 04, 2022.
“We expect further funding from multilateral and friendly countries in the donor conference planned to be held in Pakistan in November this year. Consequently, we expect the external sector to improve further in line with the increase in liquidity,” the statement reads.
The impression of restructuring of Pakistan’s debt is refuted unequivocally as currently no ‘such proposal is under consideration or is being pursued as has been categorically stated by the Finance Minister.
‘Some of the key numbers can further help understand the performance of the economy in the post-flood scenario.
