ISLAMABAD: Fitch on Tuesday upgraded Pakistan credit rating to ‘B-‘ from ‘CCC+’, reflecting increased confidence in the country’s fiscal consolidation efforts, economic policy credibility, and improving external position. The international credit rating agency has also assigned a Stable Outlook, signaling expectations of continued macroeconomic recovery.
The upgrade is rooted in Pakistan’s sustained progress under the IMF’s Extended Fund Facility and its new Resilience and Sustainability Facility. According to Fitch, the government’s fiscal deficit is forecast to narrow to 6% of GDP by the end of FY25, supported by a projected primary surplus of over 2%. Provincial fiscal surpluses and reduced public spending are expected to offset lower-than-anticipated tax revenues.
Fitch’s decision to upgrade Pakistan credit rating also considers a downward trend in the debt-to-GDP ratio, which declined from 75% in FY23 to 67% in FY24. Despite lingering debt servicing challenges, the agency sees gradual improvement ahead, bolstered by nominal growth and monetary tightening.
Inflation is projected to ease to 5% in FY25, down from over 20% in the previous two years, while GDP growth is expected to recover modestly to 3%. The central bank’s recent decision to hold interest rates at 12% reflects cautious optimism amid ongoing external and domestic pressures.
Pakistan posted a current account surplus of $700 million during the first eight months of FY25, driven by robust remittances and lower import costs. While external financing needs remain significant—over $8 billion in FY25 and $9 billion in FY26—authorities have secured a mix of bilateral, multilateral, and commercial funding sources to bridge the gap.