KARACHI – The Pakistan Stock Exchange continued the bullish trend to hit another record high on Tuesday amid positive economic indicators, Fitch’s positive outlook on Pakistani banks and upgrade in ratings of the country by Moody’s.
During intraday trading, the KSE-100 index gained 965.65 points to reach all-time high of 149,162.07 points, marking a positive change of 0.45 percent compared to previous close of 148,196.2 points.
A day earlier, Fitch Ratings said Pakistan’s banks are set to benefit from better opportunities to generate business volumes due to improving operating conditions amid receding macroeconomic headwinds.
This view is reinforced by Pakistan’s improved sovereign credit profile, as reflected in Fitch’s upgrade of Pakistan’s Long-Term Issuer Default Rating (IDR) to ‘B-‘/Stable from ‘CCC+’ in April 2025, underpinned by ongoing economic recovery, reforms and improving fiscal performance, the rating agency said in a press release.
Pakistan’s economic recovery comes after a period of significant turmoil and high inflation. We expect the country’s real GDP growth to accelerate to 3.5% by 2027 from 2.5% in 2024. Consumer price inflation eased to 4.1% in July 2025 from its peak of 38% in May 2023, and we expect it to average around 5% in 2025. The halving of the policy rate since May 2024 to 11% and a stabilising external position, evident in lower currency volatility and current account surpluses, should support this recovery.
Fitch expects the combination of lower interest rates and an improving macroeconomic environment to stimulate private credit demand, supporting steadier loan and deposit growth, and banks’ financial performance. Continued fiscal and economic reforms could enable banks to deploy more credit to the private sector, which reached a cyclical low of 9.7% of GDP in 2024, and reduce banks’ dependence on public-sector lending.
Nevertheless, there are risks associated with Pakistan’s improving, albeit still weak, operating environment and its low sovereign credit rating. The banks’ intrinsic creditworthiness will likely remain closely linked to the sovereign and the pace of economic reform in the near term given their significant holdings of sovereign securities and loan exposures to state-linked entities.
Pakistani banks have demonstrated resilient financial performance despite challenging conditions in recent years. The sector’s impaired loan ratio improved to 7.1% by March 2025 from 7.6% at end-2023, driven by strong loan growth of 26% amid high inflation. We expect the pace of further improvement to slow as loan growth decelerates, but asset-quality pressures should remain manageable as lower interest rates enhance borrowers’ repayment capacity.
