S&P Global Ratings has upgraded Pakistan’s long-term sovereign credit rating from ‘B-‘ to ‘B’, citing improved institutional stability, successful implementation of International Monetary Fund (IMF) reforms, stronger foreign exchange reserves, and continued fiscal consolidation.
The agency also affirmed Pakistan’s short-term sovereign credit rating at ‘B’ and assigned a stable outlook, reflecting expectations that ongoing reforms will support sustainable economic growth and fiscal discipline.
According to S&P, Pakistan’s progress under the $7 billion IMF Extended Fund Facility (EFF) has strengthened the country’s institutional capacity and restored macroeconomic stability.
The ratings agency said Pakistan has met most IMF reform targets, allowing timely disbursements and helping rebuild foreign exchange reserves while improving investor confidence.
S&P noted that the government’s efforts to expand the tax base and implement structural reforms have accelerated fiscal consolidation and reduced pressure on external finances.
The agency highlighted that Pakistan’s foreign exchange reserves, including the State Bank of Pakistan’s gold holdings, increased to $25.3 billion by the end of June 2026, compared with $6.7 billion in December 2022.
It said the improved reserve position is sufficient to cover the government’s external principal repayments of $16.4 billionover the next 12 months.
S&P projected Pakistan’s general government fiscal deficit to remain around 4% of GDP in fiscal year 2027, down significantly from nearly 8% of GDP during the economic crisis in FY2022 and FY2023.
The agency also credited the government’s revenue reforms, including broadening the tax base, for increasing tax collection and improving fiscal sustainability.
The ratings agency expects Pakistan’s economy to grow by 3.5% in fiscal year 2027 after recording 3.6% growth in FY2026.
While inflation increased during the second half of FY2026 due to higher global energy prices linked to Middle East tensions, S&P expects inflation to gradually moderate to 6.5% by FY2029.
The agency also projected Pakistan’s GDP per capita to approach $2,000 in FY2027, supported by continued economic growth and relative stability in the Pakistani rupee.
S&P said the stable outlook reflects its expectation that Pakistan will continue implementing economic reforms, receive financial support from bilateral and multilateral partners, and maintain access to international financing.
However, the agency cautioned that the rating could come under pressure if fiscal discipline weakens, foreign exchange reserves deteriorate, or debt-servicing costs rise significantly.
Conversely, S&P indicated that further upgrades could be considered if Pakistan continues to strengthen its fiscal position, reduce public debt, improve external indicators, and sustain economic reforms over the medium term.
