Moody’s Upgrades Pakistan’s Credit Rating to Caa1:

Global credit rating agency Moody’s Investors Service has upgraded Pakistan’s credit rating from Caa2 to Caa1. Along with this, the outlook has been revised from positive to stable. This decision reflects Pakistan’s improving economy and the reforms implemented under the IMF programme.

Economic Improvements Behind the Upgrade:

Moody’s stated that Pakistan’s external position and fiscal health are both showing improvement:

• Foreign exchange reserves reached $14.3 billion as of July 25, 2025 — equivalent to about 10 weeks of imports. In August 2024, reserves were only $9.4 billion.
• Debt affordability has improved slightly, though it remains at a low level.

Recent Financial Achievements:

• Pakistan successfully completed the first review of the IMF programme, which led to a $1 billion disbursement in May 2025.
• The Asian Development Bank (ADB) approved a $1 billion commercial loan in June 2025.

Moody’s has noted that if reforms and external support continue at the current pace, Pakistan’s rating could improve further in the future.

Risks Pakistan Still Faces:

If the implementation of reforms slows or policy changes occur, the financing position could weaken again.

• Analysts project Pakistan’s external financing needs for FY2026 and FY2027 at around $24–25 billion.

ESG (Environmental, Social, Governance) Challenges:

Moody’s has given Pakistan low scores on ESG indicators:

• Environmental: High risks from climate change and water scarcity (Score 5)
• Social: Low income levels and limited access to healthcare and education (Score 5)
• Governance: Corruption and weak rule of law (Score 4)

Government’s Reaction:

Prime Minister Shehbaz Sharif welcomed the rating upgrade and praised the efforts of the economic team.
Finance Ministry Adviser Khurram Schehzad called it a strong signal of macroeconomic stability.
Now, all three major rating agencies — Moody’s, Fitch, and S&P — have given Pakistan a stable outlook.

This credit rating upgrade highlights Pakistan’s improving economic stability and global financial standing.
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