S&P Global Ratings upgrades Pakistan’s sovereign credit rating to ‘B’
S&P Global Ratings has upgraded Pakistan’s long-term sovereign credit rating from ‘B-’ to ‘B’ and assigned a stable outlook. The agency said the decision reflects improvements in the country’s external financial position and gradual economic recovery.
The agency also kept Pakistan’s short-term credit rating unchanged at ‘B’. At the same time, it upgraded the country’s transfer and convertibility rating from ‘B-’ to ‘B’, showing greater confidence in Pakistan’s ability to meet short-term debt payments and support foreign investment.
A sovereign credit rating is an important measure of a country’s financial strength. A higher rating gives international lenders and investors more confidence, making it easier for the country to attract investment and secure financing on better terms.
S&P said the upgrade is linked to Pakistan’s stronger institutions and its continued implementation of reforms under the International Monetary Fund (IMF) programme. According to the agency, “Our upgrade on Pakistan is predicated on improved institutional stability that has helped to implement critical IMF programme reforms.”
The agency said these reforms have strengthened public finances and increased foreign exchange reserves. It described the IMF’s $7 billion Extended Fund Facility approved in September 2024 as a major step in restoring economic stability and rebuilding the country’s financial reserves.
According to S&P, Pakistan has successfully achieved most of the IMF programme targets so far. It also noted that “A relatively stable political environment has been instrumental in this regard.”
Also read: All petrol pumps to shut from midnight tonight as nationwide strike begins
The report highlighted that Pakistan’s foreign reserves had increased to $25.3bn by the end of last month, including the central bank’s gold holdings. This is a significant improvement from $6.7bn recorded in December 2022 and is enough to cover the government’s external principal repayments of $16.4bn over the next 12 months.
S&P also believes Pakistan will continue receiving financial support from international lenders and friendly countries while maintaining access to commercial borrowing. The agency expects these funding sources to strengthen the country’s ability to meet future financial obligations.
The rating agency forecast that Pakistan’s budget deficit could fall to around four per cent of GDP by FY27. This would be a major improvement compared with nearly eight per cent recorded during the financial crisis years of 2022 and 2023.
S&P said economic reforms are expected to support steady growth and improve fiscal discipline over the coming years. However, it warned that weakening reform efforts, rising borrowing costs or worsening financial indicators could result in another review of Pakistan’s rating.
The agency also said Pakistan’s rating could improve further if government revenues continue to rise, fiscal deficits decline and external debt indicators become stronger. Better financial management and continued economic reforms would increase the chances of another upgrade.
The latest decision follows recent positive signals from other international financial institutions. Last month, Barclays upgraded Pakistan’s dollar bonds, while Fitch Ratings earlier maintained Pakistan’s long-term foreign currency rating at “B-” with a stable outlook despite warning about risks from global energy prices.
The latest upgrade is a positive sign for Pakistan’s economy and could improve investor confidence. However, keeping the rating higher will depend on continued reforms, stable policies and careful management of the country’s finances.
