ISLAMABAD: Moody’s has upgraded Pakistan’s credit rating from Caa1 to B3, citing significant improvements in governance as a major reason for the positive shift.
In its recent report, Moody’s highlighted that Pakistan’s foreign reserves have grown, and domestic borrowing costs have decreased. The agency also noted that the country’s economic stability remains steady, with a stable outlook maintained.
The upgrade reflects Pakistan’s enhanced ability to maintain international financial standing, with the higher rating expected to boost key economic indicators further. Moody’s reported that Pakistan’s foreign reserves reached $17 billion by July 2026, an increase of $3 billion over the past year.
The rating agency also observed that Pakistan’s capacity to handle its debt obligations has improved notably. In fiscal year 2026, interest payments accounted for 35% of Pakistan’s income, aided in part by a reduction in policy rates which lowered borrowing costs.
Additionally, Moody’s pointed out that Pakistan successfully issued a $750 million Eurobond in April this year.
Despite these positive developments, challenges remain, including a limited revenue base, low levels of foreign direct investment (FDI), and external financial vulnerabilities that could impact future economic stability.
