Moody’s upgrades Pakistan’s credit rating to Caa2

Moody’s Ratings upgraded the Government of Pakistan’s local and foreign currency issuer and senior unsecured debt ratings to Caa2 from Caa3, as per its latest report. The outlook for Pakistan has also been changed to positive from stable.

The upgrade reflects Pakistan’s improving macroeconomic conditions and a stronger government liquidity and external position.

The country’s default risk has decreased, supported by a staff-level agreement with the International Monetary Fund (IMF) for a $7 billion Extended Fund Facility (EFF).

While Pakistan’s foreign exchange reserves have doubled since June 2023, they remain below necessary levels to meet its external financing needs.

The country continues to rely on timely financing from official partners to fulfill its external debt obligations.

Pakistan’s Caa2 rating reflects its very weak debt affordability, which poses high debt sustainability risks. Interest payments are expected to absorb about half of government revenue in the coming years.

Attribution: Moody’s Ratings report

Subediting: M. S. Salama