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Rating Agency Cites Governance, External Position, Fiscal Metrics
Global ratings agency Moody’s on Monday upgraded Pakistan’s sovereign credit rating to B3 from Caa1, citing improvements in governance, the country’s external position, and fiscal metrics, while maintaining a stable outlook . The upgrade marks another positive assessment of Pakistan’s improving macroeconomic stability and debt affordability after a period of severe external and fiscal pressures .
Moody’s said improvements in governance were expected to help the government sustain recent gains in the country’s external position and strengthen fiscal metrics . The agency also noted that Pakistan’s external vulnerability risks had eased since its previous rating action in August 2025 .
Key Drivers of Upgrade
The rating agency noted that foreign exchange reserves had been growing steadily amid sustained macroeconomic stabilisation, while lower domestic financing costs following monetary easing and an improved fiscal position had materially strengthened Pakistan’s debt affordability . Moody’s also upgraded Pakistan’s senior unsecured debt ratings and its senior unsecured medium-term note programme rating to (P)B3 from (P)Caa1 .
Stable Outlook and Market Implications
The stable outlook indicates that Moody’s sees a low likelihood of a rating change over the medium term . The latest decision follows S&P Global Ratings’ upgrade of Pakistan’s long-term sovereign credit rating to B from B- in July, with a stable outlook .
However, Moody’s continued to flag vulnerabilities in Pakistan’s credit profile, particularly the country’s structurally fragile external position . The upgrade from Caa1 to B3 represents a two-notch improvement on Moody’s rating scale and places Pakistan in a stronger, although still speculative, credit category. Moody’s rating scale classifies B-rated obligations as speculative and subject to high credit risk .
The upgrade is expected to strengthen Pakistan’s standing among international investors and support efforts to restore sustainable access to external financing as the government continues its broader economic stabilisation programme .
