Pakistan’s Sovereign Credit Rating Raised to B-; Outlook Rated Stable Concise and Punchy:

ISLAMABAD: Global credit rating agency Standard & Poor’s (S&P) has upgraded Pakistan’s sovereign credit rating from CCC+ to B- — the first upgrade in three years. The agency has also revised the country’s economic outlook to “stable,” citing improved macroeconomic indicators and the effective implementation of fiscal reforms.

S&P noted that Pakistan’s default risk has declined, and the path to economic recovery and financial stability appears to be on track. The upgrade reflects stronger financial conditions, rising foreign exchange reserves, and sustained progress under the IMF program.

Pakistan last held a B- rating in July 2022, while the most recent stable outlook was recorded in February 2019.

• GDP Growth: S&P forecasts economic growth at 3.6% for the current fiscal year (2025–26), slightly below the government’s target of 4.2%. The growth rate is expected to hover around 3.5% over the next two years. In terms of revenue, GDP is likely to increase by 15%.
• Inflation: Inflation is projected to decline to 6.5%, bringing relief after years of double-digit price hikes.
• Exchange Rate: The rupee is expected to remain stable at around Rs280 per dollar.
• Unemployment: The jobless rate is forecast to hold steady at 7%.
• Foreign Exchange Reserves: Reserves are projected to rise to $18.28 billion, a significant increase from $6.7 billion in December 2022. Total reserves, including gold, reached $20.5 billion by July 2025.
• Current Account & Trade Balance: The current account deficit is estimated at just 0.6% of GDP, while the trade deficit may reach 6.2%.
• Fiscal Health: The fiscal deficit has been brought down from 7.9% to 5.1% due to expenditure control. Tax revenues have also grown by 3%, thanks to IMF-backed reforms.
• Debt Servicing: Interest payments on loans are expected to decline gradually, helping ease the debt burden.

Despite the positive outlook, S&P has cautioned that political uncertainty remains high in Pakistan. The report notes that the coalition government has so far managed to implement tough reforms without triggering major social unrest, but warned of socio-political resistance to austerity and tax measures in the future.

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It also notes that achieving the remaining IMF targets, including increasing tax revenue, will remain a challenge.

Security concerns also persist. While the domestic security situation has improved since 2010, the agency notes that Pakistan continues to face external threats, especially from India. Any escalation in tensions, particularly with India, could increase credit risk. It cautions that a stable political environment is a prerequisite for continued economic improvement.

S&P also welcomed Pakistan’s $8.4 billion deal with the IMF, including allocations under the Extended Fund Facility (EFF) and climate financing components. The agreement is seen as a key contributor to restoring investor confidence and stabilizing the macroeconomic landscape.

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Looking ahead, S&P projects that Pakistan’s per capita income could exceed $2,000 by fiscal year 2026–27. However, it emphasized that further upgrades in the rating would depend on institutional strengthening, sustained political stability, and continued economic discipline.

The agency noted that while Pakistan is expected to roll over and repay commercial loans over the coming year, any deterioration in external financing conditions or resurgence in debt levels could lead to a rating downgrade.