'Moody’s took so many years to realise...': Gurmeet Chadha reacts to US's mounting debt  

Moody's Ratings lowered the long-term issuer and senior unsecured ratings of the United States from Aaa to Aa1 on Friday. This downgrade represents the first instance in which the US has relinquished its highest credit rating from a leading credit rating agency.

This decision was based on the ongoing accumulation of debt under successive administrations. In a recent social media update, Gurmeet Chadha, Managing Partner & CIO at Compcircle, highlighted the fact that Moody’s took a considerable amount of time to recognise that the US credit rating is not AAA.

For years, agencies like Moody’s, S&P, and Fitch have been accused of turning a blind eye to mounting US debt, repeated debt ceiling standoffs, and unsustainable fiscal practices. Experts have criticised that these same agencies are often quick to issue downgrades or red flags for emerging economies over far lesser concerns.

"Moody’s took so many years to realise that US credit rating is not AAA... The world is realising that the UN, WHO, WTO, IMF, international rating agencies - all these organisations are useless and biased.. they have their own agenda," Chadha noted in a post X. 

Moody's is the most recent of the three main credit rating agencies to lower its assessment of the federal government's creditworthiness. Standard & Poor's first downgraded federal debt in 2011, followed by Fitch Ratings in 2023.

Moody's projected in a statement that federal deficits are expected to widen, approaching nearly 9% of the U.S. economy by 2035, an increase from 6.4% in 2024. This growth is driven primarily by the rise in interest payments on debt, increasing entitlement spending, and relatively low revenue generation.

The US's outlook has been changed from negative to stable, indicating fiscal challenges stemming from more than ten years of increasing government debt and interest expenses. This update follows the recent CPI report in April, which displayed a decrease in inflation following President Donald Trump's tariff strategies. The downgrade underscores a decline in debt affordability when compared to other top-rated entities.

Chadha further added that increasingly, people across the world are questioning the relevance and impartiality of international bodies such as the United Nations (UN), World Health Organization (WHO), World Trade Organization (WTO), and the International Monetary Fund (IMF).

These institutions, originally established to promote global peace, health, fair trade, and financial stability, are now widely seen as politicised, inefficient, and often aligned with the interests of a few dominant nations. 

Recently, the decision by the International Monetary Fund (IMF) to disburse $1 billion to Pakistan through the Extended Fund Facility (EFF) and an additional $1.4 billion through the Resilience and Sustainability Facility (RSF) has come under intense scrutiny. This comes shortly after a terrorist attack in Kashmir's Pahalgam and amidst growing tensions between India and Pakistan.

Critics, including Indian officials, strategic experts, and voices in the region and beyond, have raised concerns about the timing of the disbursement. Many believe that it could potentially hinder efforts to de-escalate the situation. The total payouts under the programme now amount to $2.1 billion, with the RSF funds supposedly aimed at assisting Pakistan in addressing climate-related vulnerabilities.

It is to be noted that India chose to abstain from voting at the IMF Executive Board meeting, demonstrating its opposition within the bounds of IMF protocol. In contrast to the United Nations, where countries have the option to cast a 'no' vote, IMF board members are limited to voting in favour or abstaining — there is no official mechanism for outright rejection.

India has consistently maintained that Pakistan is consistently misusing IMF assistance. In the last 35 years, Pakistan has participated in 28 IMF programs, including four within the last five years. However, there has been minimal progress in terms of implementing structural reforms or achieving sustainable economic stability. Former foreign secretary Kanwal Sibal called the IMF’s move “terrible optics” and flagged its Western bias.

Yashwant Deshmukh said the fund “has blood on its hands,” while Sushant Sareen accused it of emboldening Pakistan’s military.