Moody’s Upgrades Pakistan’s Credit Rating on Improved Financial Outlook

Islamabad: (Web Desk) – Moody’s Ratings has upgraded Pakistan’s sovereign credit rating to Caa1 from Caa2 and assigned a stable outlook, citing the country’s improved financial position supported by an ongoing loan program from the International Monetary Fund (IMF).

In a statement issued on Wednesday, Moody’s analysts Grace Lim and Gene Fang said they expect Pakistan to meet its external debt obligations over the next few years, provided the government maintains steady progress on economic reforms and completes IMF reviews on time.

“We expect Pakistan to fully meet its external debt obligations for the next few years, contingent on steady progress on reform implementation and timely completion of IMF reviews,” the analysts noted, adding that while government debt affordability is improving, it remains among the weakest compared to other rated sovereigns.

IMF Pushes Pakistan to Recover Super Tax Arrears Within a Month

The upgrade places Pakistan in the same rating category as countries such as Sri Lanka, Egypt, and Tunisia. Following the announcement, Pakistan’s dollar-denominated bonds extended gains, reflecting improved investor sentiment.

Moody’s said Pakistan’s external financing needs are estimated at $24–25 billion for the fiscal year ending in June, with a similar requirement expected next year. The stable outlook reflects balanced risks to the country’s credit profile, with potential upside from faster-than-expected improvements in the external position, while downside risks remain linked to possible delays in reform implementation required to secure timely official financing.

The move follows similar upgrades by S&P Global Ratings and Fitch Ratings over the past four months, after repeated commitments by Prime Minister Shehbaz Sharif’s government to pursue fiscal consolidation and IMF-mandated structural reforms.

The rating upgrade is seen as a boost to the government’s economic agenda, aimed at reviving growth and rebuilding investor confidence after Pakistan narrowly avoided default. Engagement with the IMF has helped unlock billions of dollars in financing, stabilizing the economy and improving external buffers.