ISLAMABAD – For the first time in nearly decade, Pakistan earned a major vote of confidence from global financial markets. S&P Global upgraded the country’s sovereign credit rating to ‘B’, citing steady economic reforms, stronger fiscal management, and improving institutional stability under the IMF programme.
The upgrade comes as international ratings agency credited improving economic management, stronger institutional framework, and steady implementation of reforms. American credit rating agency assigned Islamabad a stable outlook, saying the country’s political and institutional environment has become more supportive of reforms.
It also mentioned efforts to broaden tax base and improve revenue collection which have eventually produced results, helping narrow fiscal deficits and gradually reduce the government’s debt burden.
IMF-backed reforms also played key role in stabilising Pakistan’s economy by rebuilding foreign exchange reserves, improving fiscal management, and easing pressure on the country’s external financing position. The successful execution of these reforms was identified as one of the biggest reasons behind the credit rating upgrade.
S&P also expressed confidence that Pakistan will continue receiving financial support from official lenders, enabling the country to comfortably meet its external debt obligations while maintaining access to commercial financing through the rollover of existing credit lines over the next 12 months.
The ratings agency projected Pakistan’s economy to expand by 3.5 percent in fiscal year 2026-27, driven by continued structural reforms under the IMF programme. Although higher energy costs stemming from tensions in the Middle East could keep inflationary pressures alive, S&P believes the overall growth trajectory will remain intact as economic fundamentals continue to improve.
The report further highlighted greater political stability since the February 2024 general elections, noting that the coalition government has managed to implement difficult economic measures and consistently meet IMF programme targets without triggering major social unrest.
It added that authorities have demonstrated a stronger ability to control public spending while expanding tax revenues, strengthening confidence in Pakistan’s fiscal outlook.
Despite the optimistic assessment, S&P warned that security and geopolitical risks remain key challenges. The agency acknowledged that Pakistan’s internal security situation has improved substantially compared to the early 2010s, but cautioned that tensions with India and Afghanistan continue to pose risks. It warned that any escalation or unintended border confrontation could negatively affect investor confidence and the country’s credit profile.
Reacting to the development, Advisor to the Finance Minister Khurram Schehzad described the upgrade as another major vote of confidence in Pakistan’s economic turnaround. He said the country had regained the ‘B’ sovereign rating for the first time since 2016-17, calling it a clear indication that international institutions are recognizing Pakistan’s improving economic direction.
S&P based its decision on Pakistan’s strengthened institutional capacity, successful implementation of key economic reforms, faster fiscal consolidation, healthier foreign exchange reserves, and improved macroeconomic stability. He added that the agency’s stable outlook reflects confidence that continued reforms will keep the economy on a path of sustained growth while reinforcing fiscal discipline.
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