Global ratings agency Fitch cut Pakistan’s sovereign credit rating on Friday by a notch to ‘CCC+’ from ‘B-’, citing further deterioration in the country’s external liquidity and funding conditions and a drop in foreign exchange reserves.

The drop comes three months after Fitch revised down the ranking to B- while downgrading the country’s outlook from ‘stable’ to ‘negative’.

Fitch typically does not assign outlooks to sovereigns with a rating of ‘CCC+’ or below.

Recent widespread floods in Pakistan have further weakened the country’s economy, already in turmoil with a rising current account deficit, inflation above 20 per cent and a sharp depreciation of the rupee currency.

The agency said the floods, which have killed over 1,700 and caused more than $30 billion damage to the economy, will undermine Pakistan’s efforts to rein in twin fiscal and current account deficits.

On the policy front, Fitch said it assumed that Pakistan will continue to receive disbursements under its International Monetary Fund programme, but risks to this have risen.

The Asian Development Bank (ADB) has pledged up to $2.5 billion to Pakistan, of which it will get funds worth $1.5bn by next week under its Balochistan Rural Development and Community Empowerment programme.

Earlier this month, Moody’s Investor Service cut Pakistan’s sovereign credit rating by one notch to Caa1 from B3, also citing increased government liquidity and external vulnerability risks following the devastating floods.

“The outlook remains negative,” said the New York-based rating agency, adding that the floods had exacerbated Pakistan’s liquidity and external credit weaknesses and vastly increased social spending needs, while government revenue is severely hit.

Debt affordability, a long-standing credit weakness for Pakistan, will remain extremely weak for the foreseeable future. The downgrade has pushed the country into the C-cate­gory after seven years, i.e. March 2015, the agency said.

But Finance Minister Ishaq Dar believed there was “no cause for worry”.

A day after the downgrade by Moody’s, he warned of giving a “befitting” reply in a meeting with the agency’s officials next week if the agency did not reverse the downgrade.

“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 had said while speaking to the media in Islamabad.

Dar claimed he had spoken to the agency’s officials and told them that they “should not have done it”.

Moody’s should have consulted Pakistan prior to the downgrade, the finance minister had said, adding that there was “no cause for worry” as rating agency Fitch had also downgraded the United Kingdom earlier this week.

“The main work of these rating agencies is related to bonds. We floated $500 million bonds in April 2014 and we had 14 times oversubscription.

“We have given our response. I have worked in international organisations too. It was impossible for them (Moody’s) to undo [the downgrade],” he acknowledged, but reiterated that he would give a “befitting response” to the agency.

Meanwhile, the government had also taken exception to Moody’s downgrade, saying that the action was taken “unilaterally without prior consultations and meetings with teams from the Ministry of Finance and State Bank of Pakistan”.