ISLAMABAD: Global ratings agency Moody’s has upgraded Pakistan’s sovereign credit rating from Caa1 to B3, citing improvements in governance, the country’s external position and fiscal indicators. The agency has maintained a stable outlook.
Moody’s said Pakistan’s external vulnerability risks have eased since its previous rating action in August 2025, with foreign exchange reserves rising amid continued macroeconomic stabilisation. The agency also pointed to lower domestic financing costs following monetary easing and an improvement in the government’s fiscal position.
According to the figures cited in the report, Pakistan’s foreign exchange reserves reached $17 billion by July 2026, an increase of around $3 billion over the previous year. Interest payments accounted for about 35% of government revenue in fiscal year 2026, while lower policy rates helped reduce domestic borrowing costs.
Moody’s also noted that Pakistan raised $750 million through a Eurobond in April 2026, reflecting improved access to international capital markets.
Despite the upgrade, Moody’s said Pakistan’s credit profile remains vulnerable because of a structurally fragile external position, a relatively narrow revenue base, weak debt affordability and difficulties in attracting investment and achieving stronger economic growth.
The upgrade comes about a month after S&P Global Ratings raised Pakistan’s long-term sovereign rating from B- to B, also with a stable outlook.
The improved rating is expected to support investor confidence and could help Pakistan obtain financing on more favourable terms, although significant economic vulnerabilities remain.
