Upgrade hinges on reforms

According to The Express Tribune, Moody's Assistant Vice President Grace Lim said any further lift in Pakistan's sovereign rating depends on steady reform execution, rebuilt foreign exchange reserves and continued access to financing. Her remarks came in an interview with state-run Pakistan TV Digital, held after Moody's raised the rating to B3 the previous month. Lim said Pakistan now handles outside economic shocks more capably than in 2022, crediting two years of macroeconomic stabilisation.

Lim attributed the upgrade to three drivers: stronger governance, a firmer external position and better fiscal indicators. Lower price pressures, steadier currency rates and a larger reserve buffer gave the economy more room to absorb the Middle East conflict than during the 2022 oil shock. She also said revenue reforms from the past two years were already built into the rating decision.

Lim cautioned that the rating still reflects a fragile external position, a small export base and limited foreign direct investment. Debt affordability, which measures how much government income goes to interest costs, is improving but remains weak. Moody's also pointed to constraints on growth and investment, while international surveys show weak rule of law and limited control of corruption. Any further upgrade would need sustained implementation, including fiscal reforms that meaningfully ease debt affordability.