Credit rating agency S&P Global raised Pakistan’s long-term sovereign credit rating to “B” from “B-” on Wednesday, citing greater institutional stability and effective implementation of reforms under an IMF program.
Pakistan’s rating outlook was left at “stable” as sustained official financing is expected to help the country meet its external obligations while allowing it to continue renewing commercial credit lines over the next 12 months.
The agency said the government’s efforts to broaden the tax base have improved revenue collection and accelerated fiscal consolidation, supporting a gradual decline in the country’s debt burden.
IMF-backed reforms have helped restore macroeconomic stability, rebuild foreign exchange reserves and ease strains on Pakistan’s fiscal and external positions, S&P said.
Tax reforms and continued foreign capital inflows have also strengthened the country’s fiscal and external defenses against potential external shocks, the ratings agency said.
The upgrade comes as Pakistan seeks additional external financing, including a proposal for a $10 billion currency stabilization mechanism from the United States, Reuters reported earlier on Wednesday, citing a source.
If approved, the mechanism would bolster Pakistan’s foreign exchange reserves, ease pressure on the currency and reduce its dependence on multilateral financing, even as Islamabad pursues tighter fiscal and monetary policies in line with its IMF program.
S&P forecasts Pakistan’s economy will grow 3.5% in fiscal 2027 and expects only marginal price pressures due to a shock to energy prices stemming from the conflict in the Middle East.
