Fitch upgrades Pakistan’s credit rating from CCC+ to B-

Fitch Ratings has upgraded the default score of Pakistan’s external coinage issuer to “B- from” CCC+”, citing stronger fiscal integration efforts and improving external stability.

This marks Pakistan’s first upgrade in almost six years. The prospects have been revised to a fixed, last presented in 2018.

The Evaluation Organization highlighted the increased confidence in Islamabad’s ability to limit budget deficits and seek structural reforms under the International Monetary Fund program (IMF).

Fitch stressed that while strict economic policies will help rebuild international reserves, funding needs remain significant.

The global commercial risks and security challenges, especially close to the Afghan border and the bait, also weigh the prospects.

In March, Pakistan secured an IMF personnel agreement with the installation of an extensive capital of $ 7 billion and a new $ 1.3 billion dollar resilience and sustainability unit, expanded in the mid -2027.

The country responded to the main targets for reserves and primary surpluses, although tax revenue was lowered.

The Agency provides for the Pakistani budget to shrink to 6% of GDP during the financial year expiring in June 2025, from almost 7% last year.

The main surplus is expected to exceed twice as much in more than 2% of GDP.

Government debt declined to 67% of GDP FY24, from 75% last year, and is expected to gradually decline in the medium term.

However, Fitch noted that the debt index would upgrade FY25 due to the sharp fall in inflation before repeating its downward track.

Consumer inflation is projected to an average of 5% FY25, from over 20% over the past two years, on the back of the weakened bases from energy prices.

External accounts showed improvement, with a surplus of current transactions of $ 700 million during the first eight months of FY25, supported by strong remittances and lower import costs.

Gross stocks increased to about $ 18 billion in March 2025, covering about three months of imports, compared to $ 8 billion in early 2023.

Despite positive prospects, Pakistan faces $ 8 billion in external debt repayments of $ 25 and $ 9 billion next year, with the exception of bilateral rings.

The government secured $ 4 billion in external funding during the first half of FY25 and aims to raise $ 10 billion more by the end of the year.

Fitch has kept concerns about Pakistan’s weak governance, entrusting him with the lowest ESG governance score, citing fragile institutional quality and rule of law.