Pakistan has received a welcome boost on the international financial stage as Moody’s Ratings upgraded the country’s credit rating from Caa2 to Caa1, with a stable outlook.
This Pakistan credit rating upgrade comes after recent similar moves by S&P Global Ratings and Fitch Ratings.
Moody’s says the upgrade reflects Pakistan’s improved financial health, supported by reforms and the continuation of the IMF Extended Fund Facility (EFF) programme. The agency credited the government’s commitment to fiscal discipline and reforms under Prime Minister Shehbaz Sharif for restoring confidence among global lenders.
The new rating covers Pakistan’s local and foreign currency issuer and senior unsecured debt. It also applies to the Pakistan Global Sukuk Programme Co Ltd, whose payment obligations are considered direct responsibilities of the government.
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According to Moody’s, Pakistan’s external position is getting stronger, with foreign exchange reserves expected to improve further. However, the country will still rely heavily on timely funding from international partners. The fiscal position has also strengthened, helped by an expanding tax base, though debt affordability remains one of the weakest among rated countries.
The agency cautioned that governance weaknesses and high political uncertainty remain major risks. It also warned that delays in reforms could harm Pakistan’s ability to secure necessary financing in the future.
Moody’s noted that the stable outlook signals balanced risks. On the positive side, debt servicing and external stability could improve faster than expected. On the downside, any reform delays could reverse progress.
The Pakistan credit rating upgrade also raises the country’s local and foreign currency ceilings, reflecting gradual improvements despite ongoing economic and political challenges. With this decision, Pakistan’s position in global financial markets appears more promising, but continued reform is key to maintaining momentum.
