Moody’s Upgrades Pakistan’s Sovereign Rating to B3 from Caa1

Global ratings agency Moody’s has upgraded Pakistan’s sovereign credit rating to B3 from Caa1, citing improvements in governance and easing external vulnerability risks.

The agency, in a statement issued on Monday, maintained Pakistan’s outlook at stable, reflecting expectations that the country’s recent economic improvements will continue.

Moody’s said it expects the recent improvement in Pakistan’s debt affordability to be durable, supported by sustained macroeconomic stability.

The upgrade comes just a month after S&P Global Ratings raised Pakistan’s long-term sovereign credit rating to B from B-, citing an improving external position and gradual macroeconomic stabilisation. S&P also maintained a stable outlook for Pakistan.

A sovereign credit rating is an assessment of a country’s ability to meet its debt obligations and serves as an important indicator of financial health for international investors and lenders.

An improvement in the rating can strengthen investor confidence in the economy, potentially helping Pakistan attract greater foreign investment and access international financing on more favourable terms.

The latest upgrade by Moody’s marks another positive development for Pakistan’s external and macroeconomic outlook as the country continues efforts to strengthen its fiscal position, improve debt affordability and reduce external vulnerabilities.

Lower domestic financing costs during monetary easing and an improved fiscal position have led to a material improvement in Pakistan’s debt affordability. The country’s credit profile shows greater resilience to external shocks than in previous cycles, including the ongoing Middle East conflict.

Pakistan’s credit profile remains vulnerable due to a structurally fragile external position, weak debt affordability, a relatively narrow revenue base, and constraints on attracting investment and stimulating economic growth. These factors are embedded in the B3 rating.

The stable outlook balances potential faster improvement in Pakistan’s credit fundamentals against risks related to these vulnerabilities, which could weaken access to foreign-currency financing and reduce fiscal flexibility.

The upgrade also applies to backed foreign currency senior unsecured ratings for The Pakistan Global Sukuk Programme Co Ltd, whose payment obligations are direct obligations of the Pakistani government. The outlook for this entity remains stable.

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