ISLAMABAD, Aug 13 (APP):Moody’s Ratings (Moody’s) on Wednesday upgraded the Pakistan’s local and foreign currency issuer and senior unsecured debt ratings to Caa1 from Caa2 and changed the outlook for Pakistan to stable from positive.
“We have also upgraded the rating for the senior unsecured MTN programme to (P)Caa1 from (P)Caa2. Concurrently, we changed the outlook for the Government of Pakistan to stable from positive,” the agency said.
The upgrade to Caa1 reflects Pakistan’s improving external position, supported by its progress in reform implementation under the IMF Extended Fund Facility (EFF) program. Foreign exchange reserves are likely to continue to improve, although Pakistan will remain dependent on timely financing from official partners.
Meanwhile, the sovereign’s fiscal position is also strengthening from very weak levels, supported by an expanding tax base. Its debt affordability has improved, but remains one of the weakest among rated sovereigns. The Caa1 rating also incorporates the country’s weak governance and high political uncertainty.
The stable outlook reflects balanced risks to Pakistan’s credit profile. On the upside, improvements in the debt service burden and external profile could be more rapid than we currently expect. On the downside, there remains risks of delays in reform implementation required to secure timely official financing, which would in turn weaken Pakistan’s external position again.
The upgrade to Caa1 from Caa2 rating also applies to the backed foreign currency senior unsecured ratings for The Pakistan Global Sukuk Programme Co Ltd. The associated payment obligations are, in our view, direct obligations of the government of Pakistan, it added.
Concurrently, we changed the outlook for The Pakistan Global Sukuk Programme Co Ltd to stable from positive, mirroring the stable outlook on the Government of Pakistan.
“Concurrent to today’s action, we have also raised Pakistan’s local and foreign currency country ceilings to B2 and Caa1 from B3 and Caa2, respectively. The two-notch gap between the local currency ceiling and sovereign rating is driven by the government’s relatively large footprint in the economy, weak institutions, and high political and external vulnerability risk,” it said.
The two-notch gap between the foreign currency ceiling and the local currency ceiling reflects incomplete capital account convertibility and relatively weak policy effectiveness. It also takes into account risks of transfer and convertibility restrictions being imposed, it added.
Meanwhile, Advisor to the Finance Minister Khurram Schehzad congratulated the nation on the upgrade of the country’s sovereign credit rating by Moody’s, describing it as a significant milestone that reflects growing international confidence in the government’s economic reform agenda.
“While challenges remain, this recognition reaffirms that Pakistan is on a clear path toward greater macroeconomic stability and resilience,” Shehzad noted while writing on X.
With Moody’s upgrade, all three leading global rating agencies have now improved Pakistan’s sovereign credit ratings with stable outlooks including S&P: B- with Stable Outlook; Fitch: B- with Stable Outlook; Moody’s: Caa1 with Stable Outlook, he added.
These upgrades have occurred within the shortest possible timeframe, with some ratings reaching levels not seen in around three years.
Khurram Shehzad extended his heartfelt wishes to the entire nation, stating, “On this moment of positive progress, I extend my heartfelt wishes to the entire nation for a very Happy Independence Day!”
This development marks a promising step forward for Pakistan’s economy, signaling renewed confidence from the global financial community.