Global credit rating agency Moody’s has upgraded Pakistan’s local and foreign currency debt rating by one notch — from Caa2 to Caa1.

It also improved the country’s economic outlook from “positive” to “stable”, citing progress in economic reforms and improved external stability.

Moody’s cites improvement in external position

According to Moody’s, the upgrade reflects strengthened external buffers and better management of Pakistan’s financial obligations. The agency noted that further improvement in foreign exchange reserves is possible, though timely financing will require continued support from official partners.

Also Read: Moody's upgrades Pakistan's rating from Caa3 to Caa2

The report acknowledged Pakistan’s adherence to economic reforms under the IMF program, which has helped stabilise the macroeconomic environment.

Moody's has upgraded Pakistan's rating after a whole year; last time it had been upgraded in August 2024 from Caa3
to Caa2.

PM Shehbaz welcomes upgrade

Prime Minister Shehbaz Sharif expressed satisfaction over the improved rating, calling it a sign that Pakistan’s economic policies are moving in the right direction.

“This rating upgrade is very welcome. Our economic team is working hard to further improve Pakistan’s standing in global markets,” he stated.

Earlier, global agencies Fitch and S&P also improved Pakistan's rating.

Also Read: Fitch upgrades Pakistan’s credit rating to B-, says economy stable

“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. Accordingly, Pakistan’s default risk has reduced to a level consistent with a Caa2 rating,” the statement had read.

The global credit rating agency, which downgraded Pakistan in February 2023, had said “there is now greater certainty on Pakistan’s sources of external financing, following the sovereign’s staff-level agreement with the International Monetary Fund (IMF) on 12 July 2024 for a 37-month Extended Fund Facility (EFF) of $7 billion”.

In April, Fitch Ratings upgraded Pakistan’s long-term sovereign credit rating from ‘CCC+’ to ‘B-’, while also declaring the country's economic outlook as stable in a significant boost to Pakistan’s economic credibility.

The upgrade came after a gap of three years and reflected improving macroeconomic indicators, fiscal discipline, and structural reforms underway in the country.

Also Read: Pakistan’s credit rating upgraded to B- with stable outlook

Fitch had highlighted that Pakistan’s fiscal deficit had reduced and the government was actively pursuing structural reforms. It noted that the country performed well on IMF targets, particularly in areas such as foreign exchange reserves, primary surplus, and fiscal consolidation.

In July, Standard & Poor’s (S&P) upgraded Pakistan’s sovereign credit rating for the first time in three years, raising it from CCC+ to B-.

The country’s economic outlook had also been changed to “stable”, reflecting improved macroeconomic indicators and successful implementation of fiscal reforms.