Rating agency Moody's downgraded Pakistan's sovereign credit rating by two notches on Tuesday.

The company now has Pakistan at the Caa3 level. That's below the agency's lowest investment grade.

Pakistan's foreign exchange reserves, at the end of January, stood at around 3.1 billion dollars. That's less than one-fifth of the figure a year ago.

The agency said Pakistan's reserves are well below the levels necessary to pay for imports and debt costs. Moody's also said fragile liquidity significantly raises default risks.

Pakistan was hit by massive floods last year. A worsening trade balance and higher energy costs contributed to the plunge in foreign exchange reserves.

Pakistan's government has curtailed energy imports as part of its efforts to prevent foreign currency outflow.

Fitch Ratings also slashed Pakistan's credit ranking by two notches to "CCC -" last month.