ISLAMABAD: Global ratings agency Moody’s has 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 two-notch 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 Pakistan’s external position and strengthen fiscal metrics. The agency also noted that external vulnerability risks had eased since its previous rating action in August 2025.
According to Moody’s, foreign exchange reserves have been growing steadily amid continued macroeconomic stabilisation, while lower domestic financing costs following monetary easing and an improved fiscal position have strengthened Pakistan’s debt affordability.
The ratings agency also upgraded Pakistan’s senior unsecured debt ratings and senior unsecured medium-term note programme rating to (P)B3 from (P)Caa1.
Moody’s maintained a stable outlook, indicating that it sees a low likelihood of a rating change over the medium term.
The latest upgrade follows S&P Global Ratings’ decision in July to raise Pakistan’s long-term sovereign credit rating to B from B-, also with a stable outlook.
A sovereign credit rating reflects a country’s ability and willingness to meet its debt obligations and is closely monitored by international investors and lenders. An improved rating can strengthen investor confidence, potentially lower borrowing costs and improve access to international capital markets.
Despite the upgrade, Moody’s continued to highlight vulnerabilities in Pakistan’s credit profile, particularly the country’s structurally fragile external position.
The move 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 classifies B-rated obligations as speculative and subject to high credit risk.
The upgrade is expected to support Pakistan’s efforts to restore sustainable access to external financing as the government continues its broader economic stabilisation and reform programme.
PM welcomes Moody’s upgrade
Prime Minister Shehbaz Sharif welcomed Moody’s decision, congratulating the nation and praising the government’s economic team for its efforts to stabilise the economy.
The prime minister said the improved rating reflected growing international confidence in Pakistan’s economic policies and reform agenda.
“Pakistan’s economy is moving towards stability, and the improvement in its rating by international institutions is clear evidence of this,” Shehbaz said.
He said the government had taken effective measures to stabilise the economy and strengthen the external sector, adding that continued reforms were helping increase international confidence in Pakistan.
Shehbaz praised Deputy Prime Minister and Foreign Minister Ishaq Dar, Chief of Defence Forces Field Marshal Syed Asim Munir, Finance Minister Muhammad Aurangzeb and other ministers and officials for their contributions towards improving the country’s economic position.
He said the government would further accelerate the reform process to put Pakistan’s economy on sustainable foundations.
“Our destination is to build Pakistan into a strong, self-reliant and sustainable economy,” the prime minister said.
