Moody's Ratings upgraded Pakistan's credit rating to Caa1 from Caa2, maintaining a stable outlook. This upgrade, announced on August 13, 2025, reflects an improvement in the country's financial position, significantly bolstered by a loan from the International Monetary Fund (IMF).
The rating agency noted that Pakistan's external position has strengthened, with foreign exchange reserves rising to $14.3 billion as of July 25, 2025, from $9.4 billion in August 2024. This increase is equivalent to about ten weeks of imports. The country successfully completed the first review of its IMF program, leading to a $1 billion disbursement in May 2025, and secured an additional $1 billion commercial loan from the Asian Development Bank (ADB) in June 2025.
Moody's also highlighted that Pakistan's fiscal position is improving, with a strengthening tax base and better debt affordability, though it remains among the weakest globally. The fiscal deficit is projected to narrow to 4.5-5% of GDP in fiscal year 2026, down from 5.4% in fiscal year 2025. Despite these improvements, Pakistan's external position remains fragile, with estimated external financing needs of $24-25 billion in fiscal years 2026 and 2027.
This upgrade was welcomed by Pakistani officials, including Prime Minister Shehbaz Sharif and Finance Minister Mohammed Aurangzeb, who emphasized that it signals the correct direction of economic policies. The news led to an increase in Pakistan's international dollar bonds, with most rising to their highest levels since early 2022. Moody's upgrade follows similar actions by Fitch and S&P Global Ratings, with all three major agencies now having upgraded Pakistan's ratings to a stable outlook.
