Moody's upgrades Pakistan's rating

According to The Express Tribune, Moody's on Monday raised Pakistan's sovereign rating to B3 from Caa1 and kept the outlook stable. The agency said the single-notch upgrade will not materially change the country's credit risk, and the rating sits seven notches below investment grade. Prime Minister Shehbaz Sharif welcomed the move, though the rating remains in the highly speculative category.

Moody's flagged a structurally fragile external position, a small export base and heavy reliance on remittances, while noting that foreign exchange reserves have been building steadily. Governance indicators are showing early signs of improvement, yet weak rule of law, corruption control and government effectiveness remain issues. Debt affordability improved sharply, and interest payments consumed 35% of state revenue in fiscal 2026, against 49% in fiscal 2025.

The agency, citing IMF estimates, put external funding requirements at roughly $21 billion for fiscal 2027 and $30 billion for fiscal 2028. It linked continued reserve building to adherence with the IMF programme. Reserves, however, are projected at only $20 billion by the end of this fiscal year, at least $1 billion below the IMF understanding.