SINGAPORE: Moody's Investors Service (Moody's) downgraded Government of Pakistan's local and foreign currency issuer and senior unsecured debt ratings to Caa1 from B3 after seven years.

Moody's has also downgraded rating for senior unsecured Medium Term Note (MTN) programme to (P) Caa1 from (P)B3. It should be noted that outlook remains negative.

Bond credit rating service said decision to downgrade ratings to Caa1 is driven by increased government liquidity and external vulnerability risks and higher debt sustainability risks, in aftermath of devastating floods that hit country since June 2022.

"Floods have exacerbated Pakistan's liquidity and external credit weaknesses and vastly increase social spending needs, while government revenue is severely hit," a statement issued by international body read.

Rating agency said that debt affordability, a long-standing credit weakness for Pakistan, "will remain extremely weak for foreseeable future".

"Caa1 rating reflects Moody's view that Pakistan will remain highly reliant on financing from multilateral partners and other official sector creditors to meet its debt payments, in absence of access to market financing at affordable costs," it said.

Published in The Daily National Courier, October, 07 2022

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