Fitch assigns ‘B-’ rating to Pakistan’s proposed dollar bond, MTN programme

Fitch Ratings has assigned a ‘B-’ rating to Pakistan’s proposed US dollar-denominated bond and Medium-Term Note (MTN) programme, along with a Recovery Rating of ‘RR4’, indicating average recovery prospects for investors in the event of a sovereign default.

 

The rating is aligned with Pakistan’s Long-Term Foreign-Currency Issuer Default Rating (IDR), which Fitch affirmed at ‘B-’ with a Stable Outlook in April 2026.

 

According to Fitch, proceeds raised through notes issued under the MTN programme are expected to be used for general budgetary and sovereign financing requirements.

 

The agency said Pakistan’s credit profile remains vulnerable to external liquidity pressures and weaknesses in public finances. A prolonged period of elevated oil prices or a significant decline in remittance inflows could increase external financing risks and place downward pressure on the sovereign rating.

 

Fitch also warned that any slowdown in fiscal consolidation resulting in a substantial rise in government debt or deterioration in debt-servicing indicators could trigger negative rating action.

 

Factors that could support an upgrade

 

Fitch said Pakistan's rating could improve if external financing risks ease significantly and sustainably. Greater access to external funding and a stronger-than-expected recovery in foreign exchange reserves could support an upgrade.

 

A meaningful reduction in government debt and debt-servicing costs could also strengthen the sovereign credit profile, particularly if Pakistan successfully implements fiscal consolidation measures under its International Monetary Fund (IMF) programme and achieves lasting improvements in tax revenue mobilisation.

 

Governance remains a key weakness

 

Fitch also highlighted governance risks as an important factor affecting Pakistan’s sovereign rating.

 

Pakistan received an ESG Relevance Score of ‘5’ for areas including political stability and rights, rule of law, institutional and regulatory quality, and control of corruption.

 

The agency noted that Pakistan’s ranking in the World Bank Governance Indicators stands at only the 18th percentile, reflecting comparatively weak governance performance.

 

The proposed MTN programme is expected to provide Pakistan with an additional channel for accessing international financing as the government works to strengthen public finances and rebuild external buffers.

 

Despite recent improvements, Fitch said Pakistan’s sovereign credit profile remains exposed to external liquidity pressures, debt-servicing obligations and the pace at which fiscal reforms are implemented.

 

The ‘B-’ rating remains in the speculative category, indicating that Pakistan currently has adequate capacity to meet its financial obligations but remains vulnerable to adverse economic, financial and external developments.