S&P sees room for more Pakistan rating upgrades if fiscal deficit stays below 3% of GDP, debt falls under 60%

S&P Global Ratings says Pakistan could earn further rating upgrades if its fiscal gap stays beneath 3% of GDP, public debt drops below 60%, and external debt stays below 100% of current account receipts. The remarks came from Yee Farn Phua, the agency's Director of Sovereign Credit Ratings, who spoke during an appearance on a state-owned online platform. He tied the July 22 upgrade, which lifted Pakistan's long-term sovereign rating from 'B-' to 'B', to improved political stability and the reforms that followed.

According to Profit, the fiscal deficit narrowed to Rs3.31 trillion in fiscal 2025-26, equal to 2.6% of GDP and the smallest in more than two decades. A primary surplus of Rs3.63 trillion, worth 2.9% of GDP, meant public finances posted their best result in 22 years. Phua credited steadier politics with enabling IMF-backed reforms, while bilateral partners have renewed swap arrangements and added deposits at the State Bank of Pakistan.

Phua also said investment-grade status remains multiple notches away for Pakistan. He noted that economies in the region holding such ratings usually pair solid institutions with yearly expansion of 4-5% or more. He added that the country's institutional capacity has gained ground, though it begins from a rather low level.