S&P Global Ratings upgraded Pakistan’s long-term sovereign credit rating to ‘B’ from ‘B-‘ with a Stable Outlook, marking the first upgrade by S&P since 2016, when Pakistan was previously rated ‘B’. The rating trajectory had deteriorated from ‘B-‘ (2019) to ‘CCC+’ (Dec’22) amid severe external financing pressures, before recovering to ‘B-‘ (Jul’25) and now returning to the ‘B’ category.
The latest upgrade reflects a significant improvement in Pakistan’s macroeconomic and institutional fundamentals, underpinned by successful implementation of the US$7bn IMF Extended Fund Facility (EFF), strengthened institutional capacity, accelerated fiscal consolidation, and a sharp increase in foreign exchange reserves to US$25.3bn by end-Jun’26 from US$6.7bn in Dec’22.
S&P also highlighted a 3.2% of GDP increase in tax revenues over the 12 months to Jun’25, a projected reduction in the fiscal deficit to around 4.0% of GDP from nearly 8.0% during FY22–FY23, and Pakistan’s successful return to international capital markets through US$750mn Eurobond and CNY1.75bn Panda Bond issuances.
Looking ahead, the agency expects continued IMF-led reforms, sustained fiscal discipline, and official external financing to support 3.5% GDP growth in FY27, while maintaining the Stable Outlook and affirming Pakistan’s short-term sovereign rating at ‘B’
Strengthening Pakistan’s Global Investment Profile
• The S&P sovereign rating upgrade marks a significant milestone in Pakistan’s economic recovery and reinforces international confidence in the country’s reform agenda. While the rating remains within the speculative-grade category, the upgrade reflects a substantial improvement in macroeconomic stability, fiscal discipline, and external resilience. A stronger sovereign credit profile enhances Pakistan’s credibility in global financial markets, supports broader participation from international emerging-market and high-yield investors, and improves access to external financing. Combined with improving economic fundamentals, attractive equity market valuations, and continued IMF-backed reforms, the rating action strengthens Pakistan’s long-term investment proposition and lays the foundation for further sovereign rating upgrades, provided the reform momentum is sustained.
Courtesy – AL Habib Capital Markets Pvt Ltd.
