ISLAMABAD – Moody’s Investors Service upgraded Pakistan’s credit rating, raising both local and foreign currency issuer and senior unsecured debt ratings from Caa2 to Caa1.
The rating for Medium-Term Note (MTN) program was also increased, and the outlook was revised from positive to stable amid improvements in Pakistan’s external position, supported by reforms under the IMF.
Moody’s noted that foreign exchange reserves are expected to rise, while fiscal management strengthened through higher tax revenues and narrowing budget deficit while debt levels remain high, and political uncertainty and weak governance continue to pose challenges.
The upgrade also extends to The Pakistan Global Sukuk Programme Co Ltd, with obligations considered direct government liabilities. Moody’s emphasized that the country’s external position, though improving, remains fragile, and timely international financing is crucial.
New sources of support, including a $1.4 billion IMF Resilience and Sustainability Facility and a ten-year $20 billion World Bank partnership, are expected to bolster reserves. The agency projects fiscal deficits to narrow to 4.5–5% of GDP in FY2026, while interest payments will still absorb a significant portion of revenues.
Moody’s warned that delays in reform implementation or financing could reverse gains, highlighting the ongoing challenges for Pakistan’s current government.
