Moody’s upgrades Pakistan rating to B3, lifting the country’s local and foreign currency issuer and senior unsecured debt ratings from Caa1. The agency kept Pakistan’s outlook stable, citing stronger governance, improved external conditions and better fiscal performance. The move marks another step up after last year’s upgrade from Caa2 to Caa1.
Moody’s said Pakistan’s external risks have eased since its previous rating decision in August 2025. Foreign exchange reserves have continued to build as macroeconomic stability improves. The agency also pointed to lower domestic financing costs following monetary easing. Together with stronger fiscal conditions, these changes have improved Pakistan’s ability to manage its debt burden.
The rating agency expects governance improvements to help the government preserve recent gains in the external sector. It also said Pakistan’s credit profile has shown greater resilience against external shocks than in earlier periods. Moody’s specifically noted that the economy has remained more resilient even as conflict continues in the Middle East.
Moody’s upgrades Pakistan rating to B3 while maintaining a stable outlook because the agency sees both progress and continuing risks. The stable outlook reflects the possibility that credit fundamentals could improve faster than expected. At the same time, Moody’s warned that unresolved weaknesses could limit the country’s access to foreign-currency financing and reduce fiscal flexibility.
Despite the upgrade, Moody’s said Pakistan still faces major credit constraints. The country has a structurally fragile external position and relatively weak debt affordability. Its revenue base also remains narrow. In addition, limited investment and challenges in generating high-productivity economic growth continue to weigh on the overall credit profile. These factors remain part of the B3 rating.
The latest decision also covers Pakistan Global Sukuk Programme Co Ltd’s backed foreign currency senior unsecured ratings, which Moody’s raised to B3 from Caa1. The agency said the related payment obligations are direct obligations of the Government of Pakistan. The outlook for the sukuk programme remains stable.
Moody’s also raised Pakistan’s local and foreign currency country ceilings. The local currency ceiling moved to B1 from B2, while the foreign currency ceiling increased to B3 from Caa1. Moody’s upgrades Pakistan rating to B3 therefore reflects measurable progress in reserves, fiscal conditions and debt affordability, while the stable outlook highlights the need to address remaining external and structural weaknesses.
