KARACHI – Pakistan’s Banking outlook turned positive by Moody’s amid economic revival. The global credit rating agency Moody’s upgraded the country’s banking outlook as Pakistan’s macroeconomic conditions improved and the resilience of its banking system, which has shown better financial performance over the past year.
In a statement, Moody’s said positive outlook shows government’s improved financial commitments, particularly in relation to banking sector’s large exposure to government securities, which account for nearly half of their total assets. Despite the improvement, the agency cautioned that Pakistan’s long-term debt sustainability remains a concern, with weak fiscal positions and external vulnerability risks still present.
Moody’s also forecasted 3percent GDP growth for Pakistan in 2025, which marks recovery from the 2.5% growth predicted for 2024, following the country’s economic contraction of -0.2% in 2023.
The financial agency also highlighted sharp decline in inflation, expecting it to drop to around 8percent in 2025 from an average of 23pc in 2024, which could spur private-sector spending and investment.
Moodys’s also acknowledged that cut in inflation and the easing of monetary policy will help improve the economic environment, it also noted that banks in Pakistan face challenges, particularly from high exposure to government securities. Despite these risks, Moody’s expects banks to maintain adequate capital buffers due to solid cash generation and restrained loan growth.
The agency further stated that ongoing $7 billion IMF Extended Fund Facility, which was approved in September 2024, provides Pakistan with a credible source of external financing for the coming years. Moody’s also expects a positive economic outlook for Pakistan through 2026, with projected GDP growth of 4% in that year.
As financial outlook for the country is improving, Moody’s cautioned that external risks and the need for fiscal reforms remain important considerations for Pakistan’s long-term economic stability.
Moody’s upgrades Pakistan’s ratings to Caa2, changes outlook to positive
