Moody’s upgrades Pakistan’s ratings to ‘Caa2’

In a positive development, Moody’s Investors Service has upgraded Pakistan’s long-term issuer rating from “Caa3” to “Caa2” with a stable outlook.

This upgrade follows Fitch Ratings’ decision in July to raise the country’s credit rating from “CCC” to “CCC+”.

Moody’s said that this upgrade reflects Pakistan’s improved macroeconomic conditions and moderately better government external positions from very weak levels.

“We have also upgraded the rating for the senior unsecured MTN programme to (P)Caa2 from (P)Caa3. Concurrently, the outlook for Government of Pakistan is changed to positive from stable,” read the statement.

Accordingly, Pakistan’s default risk has been reduced to a level consistent with a Caa2 rating.

Earlier in July, Fitch Ratings had upgraded Pakistan’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CCC+’ from ‘CCC’.

“The upgrade reflects greater certainty over the continued availability of external funding, in the context of Pakistan’s staff-level agreement (SLA) with the IMF on a new 37-month USD7 billion Extended Fund Facility (EFF),” Fitch company said in a statement.

“Nevertheless, Pakistan’s large funding needs leave it vulnerable if it fails to implement challenging reforms, which could undermine programme performance and funding,” it warned.

“We believe this will be achievable, given the strong past record of support and significant policy measures in the recent budget for the fiscal year ending June 2025 (FY25),” it said.