Moody’s improves Pakistan’s credit ratings to Caa1

ISLAMABAD: Moody’s Ratings on Wednesday upgraded Pakistan’s local and foreign credit ratings by one notch to Caa1 from Caa2, citing its improved financial position.

“The upgrade to Caa1 reflects Pakistan’s improving external position, supported by its progress in reform implementation under the International Monetary Fund (IMF) Extended Fund Facility (EFF) program,” the global credit rating agency said.

In its statement, Moody’s said that Pakistan’s foreign exchange reserves are likely to continue to improve, although the country will remain dependent on timely financing from official partners.

Meanwhile, a credit rating agency said that the sovereign’s fiscal position is also strengthening from very weak levels, supported by an expanding tax base.

“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,” Moody’s said.

On Tuesday, Pakistan urged the rating agency to lift its rating further to enable a smoother re-entry into international capital markets.

During a virtual meeting with Moody’s, Finance Minister Muhammad Aurangzeb and other senior officials outlined the macroeconomic outlook, reform agenda, and financial stability measures.

The finance team highlighted the completion of the final IMF review under the Stand-By Arrangement, disbursement of the second tranche, and progress on the Resilience and Sustainability Facility as key milestones restoring investor confidence.

Last month, S&P Global also upgraded Pakistan’s credit rating, reestablishing confidence in the economic trajectory of the country.

Pakistan’s sovereign credit rating has been upgraded by S&P Global Ratings from CCC+ to B- with a stable outlook. The upgrade is the reason behind improved fiscal conditions, increasing foreign reserves, and assistance from the International Monetary Fund (IMF).