Moody’s Investors Service — a global agency that rates financial instruments, countries’ economies and institutions from the perspective of investor safety, has downgraded the deposit ratings of five Pakistani banks to Caa1 from B3. This means the agency has downgraded the safety profile of funds parked in these Pakistani funds. It is a major blow to the country’s crisis-hit economy.
These banks are Allied Bank Limited (ABL), Habib Bank Ltd. (HBL), MCB Bank Limited (MCB), National Bank of Pakistan (NBP) and United Bank Ltd. (UBL).
“As part of the same rating action, Moody`s lowered the Baseline Credit Assessments (BCAs) of ABL, MCB and UBL to caa1 from b3, and as a result also downgraded their local-currency long-term CRRs to B3 from B2 and their long-term Counterparty Risk Assessments to B3(cr) from B2(cr). The BCAs of NBP and HBL were affirmed at caa1,” Moody’s said in a statement.
The agency said the outlook on all banks’ deposit ratings remains negative.
The downgrading reflects the Pakistan government’s reduced capacity to support the banks.
Pakistan Finance Minister Ishaq Dar said he would give a “befitting” reply in a meeting with its officials if the agency did not reverse the downgrade, ANI reported.
“They (Moody`s officials) have to meet me. I told them if you don`t [reverse] this, I will give you a befitting response in our meeting next week,” he was quoted as saying by Dawn.
Pakistan’s economy is in a dire situation. Inflation has been over 40 percent and the country is severely cash-strapped. The foreign reserves are near empty and energy prices are skyrocketing. Pakistan’s currency has been trading at over 200 against the US dollar for months.
Sharif has been running from pillar to post for financial assistance. This is when large swathes of the country are reeling under crippling floods.
