Jerusalem, Jul 26 (IANS): Israel has rejected a report published by Moody's Investors Service, which warned that the passage of a key bill of the government's judicial overhaul plan is likely to affect the country's economy and security.

Moody's, a credit rating agency, said in the report on Tuesday that the Israeli Parliament's approval on Monday of a controversial bill that diminishes the powers of the Supreme Court "points to continued political and social tensions", Xinhua news agency reported.

"We believe the wide-ranging nature of the government's proposals could materially weaken the judiciary's independence and disrupt effective checks and balances between the various branches of government, which are important aspects of strong institutions," the report read.

In April, Moody's downgraded its outlook on Israel from "positive" to "stable", and did not change Israel's credit rating in its latest report.

In a joint statement, Israeli Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich, who is also a settler leader, dismissed Moody's report, saying the Israeli economy is "based on strong fundamentals" and will continue to grow.

"When the dust clears, it will be clear that the Israeli economy is very strong," they noted.

Also on Tuesday, the investment bank Morgan Stanley lowered Israel's sovereign credit to a "dislike stance", citing "increased uncertainty about the economic outlook in the coming months and risks".

Israeli lawmakers approved on Monday a controversial bill that cancels the Supreme Court's power to overrule government decisions it deems "unreasonable", despite warnings by senior economists and legal officials in Israel.

Mass demonstrations broke out across the country after the bill passed through the Parliament controlled by the hard-right coalition government.

Netanyahu says the reform is needed to curb what he calls the "overly activist" Supreme Court, but opponents believe it undermines the rule of law.