In a positive development for Pakistan’s economic outlook, Moody’s Investors Service has upgraded the country’s long-term issuer rating.
This change reflects improving macroeconomic conditions and enhanced government external positions.
Moody’s has raised Pakistan’s rating from “Caa3” to “Caa2” with a stable outlook. This follows Fitch Ratings’ upgrade in July, which elevated Pakistan’s credit rating from “CCC” to “CCC+.”
Moody’s stated that the upgrade reflects improvements in Pakistan’s macroeconomic conditions and a modestly improved government external position from previously weak levels. The rating for the senior unsecured MTN programme has also been upgraded to (P)Caa2 from (P)Caa3, and the outlook for the Government of Pakistan has been revised to positive from stable.
As a result, Pakistan’s default risk now aligns with a Caa2 rating.
Earlier in July, Fitch Ratings had also raised Pakistan’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CCC+’ from ‘CCC’. This upgrade was due to increased certainty regarding the availability of external funding, following Pakistan’s staff-level agreement with the IMF on a new 37-month USD 7 billion Extended Fund Facility (EFF).
However, Fitch cautioned that Pakistan’s significant funding needs make it vulnerable if it fails to implement necessary reforms, which could jeopardize programmer performance and funding. They expressed confidence in Pakistan’s ability to meet these challenges, citing the strong historical support and recent significant policy measures in the fiscal year 2025 budget.