Moody's downgrading of Pakistan's credit rating unlikely to become 'immediate crisis': Analysts

Islamabad, July 14 (ANI): The downgrading of the country's sovereign credit rating by Moody's Investor Service is unlikely to become an immediate crisis, or have any serious short-term impact on the economy, analysts have said.

Pakistan's credit rating system was further downgraded by Moody's Investor Service, which cited dwindling currency reserves and political instability.

According to The Express Tribune, Moody's decision to downgrade Pakistani government bonds from B3 to Caa1 comes as a surprise to most analysts, as many feel the decision does not take into account recent improvements in the country's macroeconomic stability, most notably the rapprochement with Washington, and falling international oil prices.

The paper quoted analysts as saying that the most immediate impact is likely to be minimal, which will be that both the government of Pakistan as well as large Pakistani corporations would borrow negligible amounts from international capital markets.

While the cost of borrowing will most definitely go up, analysts feel that given the fact that Pakistan's rating is already well into 'junk' territory, the one-notch downgrade is unlikely to make a massive difference, the paper added.

The real damage to Pakistan's economy is likely to come from the problems of perception of having that low a credit rating. The last time Moody's decided this low a credit rating, after Pakistan's nuclear tests in 1998, the country's economy was in a bad shape, with the foreign investment slowed to a trickle and the rupee plunging over 40 percent in the following two years, the report said.

However, analysts add that with the resumption of NATO supplies, Washington will once again resume Coalition Support Funds payments, which in turn will, in all certainty, stabilise the rupee. (ANI)