Moody's upgrades Pakistan's rating to B3; maintains stable outlook
Moody’s Ratings (Moody’s) on Monday upgraded the Government of Pakistan’s local and foreign currency issuer and senior unsecured debt ratings to B3 from Caa1. “We have also upgraded the rating for the senior unsecured MTN programme to (P)B3 from (P)Caa1. Concurrently, we maintained the outlook for the Government of Pakistan at stable,” the credit rating agency said. Last year in August, Moody’s…
On Monday, financial ratings agency Moody's upgraded Pakistan's government debt ratings and outlook. The agency upgraded both local and foreign currency issuer and senior unsecured debt ratings to B3 from Caa1. The rating improvement also extends to the senior unsecured MTN programme, which was upgraded from (P)Caa1 to (P)B3. Moody's maintained a stable outlook for the Government of Pakistan.
The upgrade to B3 reflects Moody's expectations that governance improvements will help Pakistan sustain recent external position improvements and strengthen fiscal metrics. Foreign exchange reserves have steadily increased due to macroeconomic stabilization. Lower domestic financing costs due to monetary easing and a better fiscal position have made Pakistan's debt more affordable. This has led to a significant improvement in Pakistan's credit profile compared to previous cycles, including the ongoing Middle East conflict.
Despite these improvements, Pakistan's credit profile remains vulnerable due to a fragile external position, low debt affordability, a narrow revenue base, and constraints on attracting investment and promoting high-productivity economic growth. These factors are reflected in the B3 rating.
Moody's also raised Pakistan's country ceilings to B1 and B3 for local and foreign currency, respectively. The agency noted that Pakistan's foreign exchange reserves rose to about $17 billion at the end of July 2026, covering nearly three months of imports. The country has regained market financing access, such as a three-year, $750 million Eurobond and a CNY 1.75 billion bond. These developments have enabled Pakistan to meet all external obligations in fiscal 2026.
However, Pakistan's external position remains vulnerable to shocks, particularly given large financing requirements. The projected reserve accumulation provides a larger buffer against adverse market or commodity price developments. Improved debt affordability, lower inflation, and strengthened policy credibility have contributed to this assessment.
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