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Finance Minister Ishaq Dar has “threatened” Moody’s Investors Service after the rating agency downgraded Pakistan’s local and foreign currency issuer and top unsecured debt rating.

In an interview with reporters on Friday, the country"s finance minister said he had informed Moody"s that if the agency did not change its decision, he would respond in an "appropriate" manner at his meeting with agency officials next week.

"They [Moody"s officials] have to meet with me. I told them that if you don"t change it, I will give you a suitable answer at our meeting next week," he said.

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He added: “There is no need to worry. I spoke to Moody"s yesterday and told them they shouldn"t have done that. They should have consulted us."

This comes after the finance ministry on Thursday questioned the rating action in which the agency downgraded Pakistan"s sovereign rating. In a statement, the ministry said Moody"s "deteriorating short- and medium-term economic outlook" does not paint the right picture due to gaps in the information available to Moody"s and its use of estimates is not based on fundamentals.

She added that the downgrade of Pakistan"s rating does not really reflect Pakistan"s macroeconomic conditions.

The rating agency said its decision to downgrade Pakistan"s sovereign ratings was largely due to increased government liquidity and external vulnerability risks and higher debt sustainability risks due to the devastating floods that have hit the country since June 2022.

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Due to the downgrade, Moody"s has lowered Pakistan"s local and foreign currency country ceilings to B2 and Caa1 from B1 and B3, respectively, as the outlook remains negative. The two-step gap between the local currency ceiling and the sovereign rating is due to the government"s relatively large footprint in the economy, weak institutions, and relatively high risk of political and external vulnerability.