S&P Global Ratings, an American credit rating agency, on Thursday warned that heightened tensions between Pakistan and India following an outbreak of hostilities have amplified regional credit risks.
In a statement, the global rating agency said it expects intense military actions between the countries to be temporary, leading to contained confrontations. However, it cautioned that miscalculations could significantly erode credit risks for both sovereigns.
The remarks come amid tensions between Pakistan and India that rose after an attack in the Indian Illegally Occupied Jammu and Kashmir (IIOJK) killed 26 men, for which New Delhi blamed Islamabad.
Pakistan denied the allegations and called for a neutral investigation of the attack.
In the wee hours of Wednesday, the Pakistan military brought down five Indian Air Force jets, including three Rafale jets, in retaliation following Indian missile attacks.
At least 31 Pakistanis were martyred and dozens were injured in Indian missile attacks inside Pakistan at six locations, Director General of Inter-Services Public Relations (DG ISPR) Lt Gen Ahmed Sharif Chaudhry said in a press conference.
Pakistan shot down five Indian jets, including three Rafale, one MiG-21, and one SU-30, he informed.
India reportedly responded with drone strikes, killing at least one person on Wednesday.
“India last night took yet another blatant military act of aggression against Pakistan by sending Herap drones at multiple locations,” Chaudhry said in his latest press conference on Thursday.
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He said that the Pakistan Army shot down 12 Indian drones in multiple locations in Pakistan.
However, despite the increased escalation, S&P does not anticipate an immediate impact on both sovereigns’ credit ratings.
The rating agency was of the view that tensions would remain high in the next weeks, with possible further military actions, but an ensuing de-escalation will limit lasting negative effects on sovereign creditworthiness.
It said that neither country will gain from a prolonged conflict, as it would derail Pakistan’s road to macroeconomic stability and deter foreign investment in India amid global economic volatility.
