S&P Raises Pakistan’s Sovereign Credit Rating to ‘B’

S&P Global Ratings has upgraded Pakistan’s long-term sovereign credit rating to **‘B’ from ‘B-’, citing stronger institutional stability and the successful implementation of key IMF-backed reforms. The agency said these reforms have accelerated fiscal consolidation and helped rebuild the country’s external buffers.**

 

S&P noted that Pakistan has demonstrated improved policy execution under the IMF’s USD 7 billion Extended Fund Facility, leading to higher foreign exchange reserves and reduced pressure on external financing indicators. The agency also affirmed Pakistan’s short-term sovereign rating at **‘B’ and assigned a stable outlook.**

 

According to the ratings agency, the government’s efforts to broaden the tax base and strengthen revenue collection have contributed to a decline in fiscal deficits and are expected to gradually reduce the debt-to-GDP ratio. S&P forecasts the general government deficit at around **4% of GDP in FY2027, down significantly from the crisis levels of FY2022-23.**

 

The agency highlighted that foreign exchange reserves have risen sharply from the lows of 2022 and are now sufficient to cover the government’s external principal repayments over the next 12 months. It also pointed to Pakistan’s return to international capital markets through a Eurobond issue and an inaugural panda bond placement.

 

S&P expects continued support from multilateral and bilateral partners, including the IMF, China, and Saudi Arabia, to help Pakistan meet its external obligations. However, it warned that any weakening of fiscal discipline, erosion of reform momentum, or renewed pressure on interest rates could negatively affect the country’s credit profile.

 

The stable outlook reflects S&P’s expectation that improved political and institutional conditions will support sustained economic growth, continued fiscal consolidation, and ongoing implementation of structural reforms over the medium term.