ISLAMABAD – Moody’s boosts Pakistan’s rating from Caa2 to Caa1 amid turning point in economic recovery as the country opted stern reforms despite political risks.
The new rating by US-based financial services shows major improvements in the country’s fiscal and external positions. The outlook for the government was simultaneously revised from positive to stable.
The upgrade also applies to the senior unsecured MTN programme and Pakistan Global Sukuk Programme Co Ltd, and it comes after recent similar moves by Fitch Ratings and S&P Global. Moody’s highlighted that upgrade reflects Pakistan’s progress under the IMF Extended Fund Facility (EFF) reforms, alongside expanding tax revenues and improving fiscal management.
While foreign exchange reserves have strengthened and budget deficits are narrowing, Moody’s cautioned that debt affordability remains low, governance is weak, and political uncertainty persists. The rating agency emphasized the need for continued reform implementation and timely financing from international partners to maintain stability.
Pakistan has also secured new sources of financing, including a $1.4 billion IMF Resilience and Sustainability Facility and a ten-year World Bank country partnership framework with a projected $20 billion financing envelope.
Moody’s forecast that the fiscal deficit could shrink to 4.5–5% of GDP in FY2026, with interest payments falling to 40–45% of revenue, but warned that delays in reforms could reverse gains.
Finance Minister Aurangzeb expressed optimism, citing the rating upgrade as a positive signal for Pakistan’s economic recovery and investor confidence.
Pakistani Banks’ Credit Ratings improved after Sovereign Rating upgrade
