TLDR
Moody’s lifts Pakistan’s sovereign credit rating to Caa1 from Caa2.
Upgrade driven by IMF loan support, fiscal consolidation, and reform compliance.
Follows similar moves by S&P Global Ratings and Fitch Ratings in recent months.
NEW YORK — (The Thursday Times) Moody’s Ratings has upgraded Pakistan’s credit rating from Caa2 to Caa1 with a stable outlook, citing the country’s improved financial position and fiscal discipline under the government’s IMF-backed reform programme. The decision reflects renewed global investor confidence and marks Pakistan’s highest rating in nearly two years.
Improved fiscal stability under IMF programme
In a statement, Moody’s credited Pakistan’s International Monetary Fund loan programme as a core driver of the upgrade, noting that recent disbursements have stabilised foreign exchange reserves and reduced default risk. The agency highlighted Islamabad’s commitment to fiscal consolidation — a combination of spending restraint and revenue mobilisation — as a key factor in restoring economic credibility. “Pakistan’s improved external position, supported by sustained policy reforms, underpins our stable outlook,” Moody’s said.
Momentum from global ratings agencies
The move comes after S&P Global Ratings and Fitch Ratings issued similar upgrades over the past four months. Collectively, the actions mark a shift in sentiment among major ratings agencies, which had downgraded Pakistan in recent years due to debt repayment risks and political instability.
Shehbaz Sharif government pledges reform continuity
Prime Minister Shehbaz Sharif’s administration has repeatedly assured both domestic and international stakeholders that it will adhere to IMF-mandated targets. These include broadening the tax base, reforming state-owned enterprises, and reducing energy subsidies to strengthen fiscal health.
Investor confidence on the rise
Market analysts suggest the upgrade could help Pakistan access cheaper international borrowing and attract portfolio investments into its bond market. A more favourable risk profile could also encourage foreign direct investment in sectors like energy, manufacturing, and infrastructure.
For a deeper look at the role of IMF-backed structural reforms in securing this upgrade, see our detailed analysis on how IMF reforms boosted Pakistan’s sovereign credit rating.
Regional perspective
In South Asia, Pakistan’s Caa1 rating still lags behind India’s Baa3 and Bangladesh’s Ba3, but the upgrade narrows the gap and signals positive momentum. Economists say further improvements will depend on the government’s ability to sustain reforms beyond the current IMF programme.
