Amir Khan

Moody’s Investors Service has raised Pakistan's credit rating from Caa3 to Caa2 and adjusted its outlook from stable to positive, indicating favourable trends in macroeconomic indicators.

Talking to WealthPK, Khalid Mehmood, Chief Financial Officer at Topline Securities, said that the upgrade to Caa2 reflects improvements in Pakistan’s macroeconomic conditions and better government liquidity and external positions, although these are still considered weak compared to global standards. He added that Moody’s upgrade is more than a simple notch higher on the rating scale; it represents an important shift in the international perception of Pakistan’s economic stability. “Moreover, the combined upgrades from Fitch and Moody’s position Pakistan more favourably in international capital markets, potentially allowing for the issuance of Eurobonds and Panda bonds at more competitive rates. This could significantly reduce borrowing costs, alleviate debt servicing pressures, and provide necessary fiscal space for the government.” Talking to WealthPK, Aslam Javed, Chief Economist at the Ministry of Planning, Development, and Special Initiatives, said the decision, following Fitch Ratings' upgrade last month, signals growing global confidence in Pakistan’s ability to address its economic challenges and set the stage for sustainable growth.

Khurram Shehzad, a senior analyst, while talking to WealthPK, highlighted the importance of a positive outlook. “The upgrade reflects improved economic stability, reduced macroeconomic risks, and restored confidence among investors, creditors and international partners.” “This enhanced perception is crucial as Pakistan prepares for global bond issuance and continues its efforts to broaden its financing avenues, including the IMF programme and the privatisation of key state-owned enterprises.” The recent rating upgrades by Fitch and Moody’s are expected to enhance Pakistan’s financial credibility and attract more investment. Analysts anticipate that Standard & Poor’s (S&P) may follow suit with a positive revision, which would further bolster global investor confidence and improve Pakistan’s economic outlook.

Furthermore, it is essential to recognise that while these upgrades mark a positive turning point, sustained progress will depend on Pakistan's ability to maintain economic reforms and stabilise its financial conditions. The upgrades offer a window of opportunity for the government to consolidate gains and address remaining vulnerabilities. Enhanced international market access and improved credit ratings can create a favourable environment for economic growth, provided that the country remains committed to long-term fiscal discipline and structural reforms. In conclusion, Moody’s recent credit rating upgrade is a welcome development for Pakistan. It reflects both improved economic indicators and increased confidence in international financial institutions. The challenge moving forward will be to leverage this positive momentum to implement effective reforms and achieve sustainable economic growth.

Credit: INP-WealthPk