{"id":23123,"date":"2025-08-14T15:30:34","date_gmt":"2025-08-14T15:30:34","guid":{"rendered":"https:\/\/gsrra.com\/?p=23123"},"modified":"2025-09-23T13:04:15","modified_gmt":"2025-09-23T13:04:15","slug":"moodys-upgrades-pakistans-credit-rating-to-caa1-based-on-improving-external-position","status":"publish","type":"post","link":"https:\/\/gsrra.com\/?p=23123","title":{"rendered":"Moody\u2019s upgrades Pakistan\u2019s credit rating to Caa1 based on \u2018improving external position\u2019"},"content":{"rendered":"\n

Global rating agency Moody\u2019s on Wednesday upgraded Pakistan\u2019s credit rating by one notch to Caa1 from Caa2<\/a>, citing Islamabad\u2019s improving external position, and changed its outlook from positive to stable.<\/p>\n\n\n\n

Moody\u2019s Ratings is a\u00a0credit rating system<\/a>\u00a0that evaluates the creditworthiness of borrowers, such as governments, corporations, or financial instruments. According to its\u00a0website<\/a>, the agency uses letter grades (Aaa, Aa, A, Baa, etc) to indicate the likelihood of timely repayment, with Aaa being the highest quality and C the lowest. These ratings help investors assess risk before lending or investing.<\/p>\n\n\n\n

Within this scale, Caa1, Caa2, and Caa3 all fall into the \u201cCaa\u201d category, signalling very high credit risk and poor standing. Caa1 is the highest within this group (slightly less risky), Caa2 is one notch lower, and Caa3 is the last, meaning the greatest vulnerability to default among the three.<\/p>\n\n\n\n

\u201cMoody\u2019s Ratings (Moody\u2019s) has today upgraded the Government of Pakistan\u2019s local and foreign currency issuer and senior unsecured debt ratings to Caa1 from Caa2,\u201d the international rating agency \u2014 one of the top three global rating firms \u2014 said in its statement<\/a> today.<\/p>\n\n\n\n

It cited Islamabad\u2019s improving external position and changed the outlook to Pakistan\u2019s rating to \u201cstable\u201d from positive<\/a>.<\/p>\n\n\n\n

Moody\u2019s rating outlooks<\/a> fall into four categories: positive, negative, stable and developing. A stable outlook indicates a low likelihood of a rating change over the medium term, while the other three categories indicate a \u201chigher likelihood\u201d of a rating change.<\/p>\n\n\n\n

\u201cWe have also upgraded the rating for the senior unsecured [medium-term note] programme to (P)Caa1 from (P)Caa2,\u201d it said.This table shows the rankings from highest to lowest of Moody\u2019s long-term and short-term categories. \u2014 Moody\u2019s<\/p>\n\n\n\n

\u201cThe upgrade to Caa1 reflects Pakistan\u2019s improving external position, supported by its progress in reform implementation<\/a> under the [International Monetary Fund\u2019s Extended Fund Facility (EFF) programme,\u201d Moody\u2019s highlighted.<\/p>\n\n\n\n

\u201cThe Caa1 rating also incorporates the country\u2019s weak governance and high political uncertainty,\u201d the agency noted.<\/p>\n\n\n\n

\u201cForeign exchange reserves<\/a> are likely to continue to improve, although Pakistan will remain dependent on timely financing from official partners,\u201d it forecasted.<\/p>\n\n\n\n

Moody\u2019s went on to highlight that the \u201csovereign\u2019s fiscal position is also strengthening from very weak levels, supported by an expanding tax base\u201d. \u201cIts debt affordability has improved, but remains one of the weakest among rated sovereigns,\u201d it noted.<\/p>\n\n\n\n

Expanding upon the \u201cstable\u201d outlook, the agency said it reflected \u201cbalanced risks to Pakistan\u2019s credit profile\u201d.<\/p>\n\n\n\n

\u201cOn the upside, improvements in the debt service burden<\/a> and external profile could be more rapid than we currently expect. On the downside, there remains risks of delays in reform implementation required to secure timely official financing, which would in turn weaken Pakistan\u2019s external position again,\u201d it noted.<\/p>\n\n\n\n

\u201cThe upgrade to Caa1 from Caa2 rating also applies to the backed foreign currency senior unsecured ratings for the Pakistan Global Sukuk Programme Co Ltd<\/a>,\u201d Moody\u2019s said, adding that it also changed the outlook for the Sukuk programme to stable from positive.<\/p>\n\n\n\n

\u201cWe have also raised Pakistan\u2019s local and foreign currency country ceilings to B2 and Caa1 from B3 and Caa2, respectively,\u201d the agency added.<\/p>\n\n\n\n

It noted that the two-notch gap between the local currency ceiling and sovereign rating was \u201cdriven by the government\u2019s relatively large footprint in the economy, weak institutions, and high political and external vulnerability risk\u201d.<\/p>\n\n\n\n

Prime Minister Shehbaz Sharif expressed satisfaction over the rating upgrade and appreciated his economic team\u2019s efforts, the Associated Press of Pakistan<\/em> reported.<\/p>\n\n\n\n

The premier also welcomed the Moody\u2019s \u201cupgraded rating about improvement in the economic outlook for Pakistan from positive to stable\u201d, the report quoted a press release from the PM Office as saying.<\/p>\n\n\n\n

PM Shehbaz reiterated that the government was committed to further improving the rating as it was reflective of the economic policies in the right direction.<\/p>\n\n\n\n

Hailing the development, Adviser to Finance Minister Khurram Schehzad noted: \u201cWhile challenges remain, this recognition reaffirms that Pakistan is on a clear path toward greater macroeconomic stability and resilience.<\/p>\n\n\n\n

\u201cWith Moody\u2019s upgrade, all the three top global rating agencies have now upgraded Pakistan\u2019s ratings with stable outlook,\u201d he pointed out, referring to Fitch and S&P Global Ratings.<\/p>\n\n\n\n

<\/a>External position continues to strengthen, although still fragile<\/h2>\n\n\n\n

\u201cPakistan\u2019s external position has continued to strengthen over the past year,\u201d Moody\u2019s said, adding it expected further gradual improvements as progress in reform implementation under the IMF programme supports financing from bilateral and multilateral partners.<\/p>\n\n\n\n

\u201cIn turn, this contributes to continued increases in the sovereign\u2019s foreign exchange reserves, albeit from still fragile levels,\u201d it noted.<\/p>\n\n\n\n

\u201cWe expect Pakistan to fully meet its external debt obligations for the next few years, contingent on steady progress on reform implementation and timely completion of IMF reviews.\u201d<\/p>\n\n\n\n

\u201cNonetheless, Pakistan\u2019s external position remains fragile,\u201d Moody\u2019s cautioned.<\/p>\n\n\n\n

\u201cIts foreign exchange reserves remain well below what is required to meet its external debt obligations, underscoring the importance of steady progress with the IMF programme to continually unlock financing,\u201d it explained, estimating that Pakistan\u2019s external financing needs were about $24-25bn in FY2026, and similar amounts again in FY2027.<\/p>\n\n\n\n

Detailing its rationale for the rating upgrade, Moody\u2019s noted that Pakistan fully met its external debt obligations and added to its foreign exchange reserves in FY2025.<\/p>\n\n\n\n

\u201cReserves rose<\/a> to $14.3 billion as of 25 July 2025, equivalent to about ten weeks of imports,\u201d it said, comparing them to $9.4bn at the time of the last rating update in August 2024.<\/p>\n\n\n\n

The agency also pointed out Pakistan\u2019s successful completion of the IMF programme\u2019s first review<\/a>, unlocking a $1bn disbursement in May 2025, and a $1bn commercial loan<\/a> in June 2025 by the Asian Development Bank (ADB).<\/p>\n\n\n\n

Outlining its rationale for the stable outlook rank, Moody\u2019s observed that it reflected \u201cbalanced risks to Pakistan\u2019s credit profile\u201d.<\/p>\n\n\n\n

On the upside, it said, a building track record of reforms and revenue-raising measures could unlock more financing, which in turn would further boost foreign exchange reserves and the external position.<\/p>\n\n\n\n

\u201cOn the downside, there remains risks of slippage in reform implementation or results, leading to delays in or withdrawing of financing support from official partners,\u201d it warned, saying it could lead to renewed material deterioration in the sovereign\u2019s external position.<\/p>\n\n\n\n

\u201cThe current government formed after the February 2024 elections faces a significant challenge to continually implement revenue-raising measures without triggering social tensions,\u201d the agency underscored.<\/p>\n\n\n\n

<\/a>Fiscal position improving, but debt affordability remains weak<\/h2>\n\n\n\n

Pakistan\u2019s fiscal position has improved from very weak levels, reflecting progress in implementing revenue-raising measures, Moody\u2019s observed.<\/p>\n\n\n\n

Citing narrowing budget deficits and widening primary surpluses<\/a>, the rating agency said the government debt affordability was \u201calso improving, although it remains one of the weakest among our rated sovereigns\u201d.<\/p>\n\n\n\n

Noting strengthened revenue collection, it said: \u201cWe expect the government to continue enhancing revenue administration and compliance, alongside the introduction of new tax measures.\u201d<\/p>\n\n\n\n

Noting new taxes introduced on solar panels<\/a> and e-commerce businesses<\/a> in the recent budget, Moody\u2019s estimated tax revenues to pick up by another 0.5 percentage points of GDP in FY2026. \u201cHowever, a decline in SBP dividends will lead to an overall narrowing of government revenue to about 15-15.5 per cent of GDP,\u201d it added.<\/p>\n\n\n\n

\u201cWe expect government expenditure to remain contained, even as budgeted defence spending has increased,\u201d the agency stated, noting reduced subsidies to the power sector and debt servicing costs.<\/p>\n\n\n\n

\u201cOverall, we expect the fiscal deficit to narrow further to 4.5-5pc of GDP in FY2026 (FY2025: 5.4pc),\u201d the statement added.<\/p>\n\n\n\n

<\/a>Environmental, social and governance scores\u2019 impact on rating<\/h2>\n\n\n\n

Moody\u2019s also provided its assessment of Pakistan\u2019s environmental, social and governance (ESG) credit impact scores<\/a> (CISs), which communicate the impact of ESG considerations on the rating of an issuer or transaction.<\/p>\n\n\n\n

Pakistan has a \u2018CIS-5\u2019 credit impact score, which means ESG considerations have a \u201cpronounced impact on the current rating, which is lower than it would have been if ESG risks did not exist\u201d.<\/p>\n\n\n\n

Pakistan\u2019s CIS-5 score \u201creflects its very high exposure to social and environmental risks, as well as its weak governance profile\u201d, Moody\u2019s statement said.A clarification of what Moody\u2019s ESG credit impact scores mean and what they do not. \u2014 \u2018ESG Scores Explained\u2019 presentation by Moody\u2019s<\/p>\n\n\n\n

It then stated the country\u2019s issuer profile scores (IPS) for the ESG categories, which are expressed on a scale of 1-5 points.<\/p>\n\n\n\n

\u201cPakistan\u2019s E-5 issuer profile score for environmental risk reflects the country\u2019s vulnerability to climate change<\/a> and the limited supply of clean, fresh and safe water,\u201d the agency pointed out.<\/p>\n\n\n\n

\u201cPakistan has an S-5 issuer profile score for social risk. Very low incomes as well as limited access to quality healthcare<\/a>, basic services, housing and education, especially in rural areas, together with safety concerns, are important social issues,\u201d it added.<\/p>\n\n\n\n

\u201cPakistan has a G-4 issuer profile score for governance risk. International surveys of various indicators of governance, while showing some early signs of improvement, continue to point to weak rule of law<\/a> and control of corruption, as well as limited government effectiveness.\u201dHow Moody\u2019s ESG issuer profile scores contribute to the credit impact score. \u2014 \u2018ESG Scores Explained\u2019 presentation by Moody\u2019s<\/p>\n\n\n\n

<\/a>Previous ratings<\/h2>\n\n\n\n

Finance Minister Muhammad Aurangzeb already urged Moody\u2019s in July to improve Pakistan\u2019s current Caa2<\/a> credit rating during a virtual engagement in July.<\/p>\n\n\n\n

Speaking at an event in Islamabad earlier today, Aurangzeb pointed out<\/a> that Fitch<\/a> and S&P Global Ratings<\/a> had already upgraded the country\u2019s credit ratings this year and said he was hopeful of \u201cthe third agency\u201d \u2014 an apparent reference to Moody\u2019s \u2014 doing the same soon.<\/p>\n\n\n\n

Pakistan has been postponing the launch of international bonds since July 2021 due to challenging macroeconomic conditions and resultant poor credit rating, and relying mostly on time deposits from friendly nations to meet external liabilities and stay afloat.<\/p>\n\n\n\n

The agency had last upgraded Pakistan\u2019s local and foreign currency issuer and senior unsecured debt ratings to Caa2<\/a> from Caa3 on Aug 28, 2024. It had also changed its outlook to positive from stable for improving macroeconomic conditions.<\/p>\n\n\n\n

In late February 2024 \u2014 shortly after the general elections \u2014 Moody\u2019s had retained<\/a> Pakistan\u2019s long-term credit rating at Caa3, noting that \u201cpolitical risks are high, following a highly controversial general election\u201d.<\/p>\n\n\n\n

Reference Link:- https:\/\/www.dawn.com\/news\/1930657\/moodys-upgrades-pakistans-credit-rating-to-caa1-based-on-improving-external-position<\/a><\/p>\n\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

Global rating agency Moody\u2019s on Wednesday upgraded Pakistan\u2019s credit rating by one notch to Caa1 from Caa2, citing Islamabad\u2019s improving external position, and changed its outlook from positive to stable. Moody\u2019s Ratings is a\u00a0credit rating system\u00a0that evaluates the creditworthiness of borrowers, such as governments, corporations, or financial instruments. According to its\u00a0website, the agency uses letter grades […]<\/p>\n","protected":false},"author":1,"featured_media":23124,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[2],"tags":[4290,3318,132,22752,3166,22750,22753,36,18513,22751,60],"class_list":["post-23123","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-sample-category","tag-stable-economy","tag-credit-rating","tag-economy","tag-improving-external-position","tag-moody","tag-moody-rate-pakistan-high","tag-moodys-upgrades-pakistans-credit-rating-to-caa1-based-on-improving-external-position","tag-pakistan","tag-positive-indicators-of-economy","tag-rate-caa1","tag-geopolitics"],"jetpack_publicize_connections":[],"_links":{"self":[{"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/posts\/23123","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/gsrra.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=23123"}],"version-history":[{"count":1,"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/posts\/23123\/revisions"}],"predecessor-version":[{"id":23125,"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/posts\/23123\/revisions\/23125"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/media\/23124"}],"wp:attachment":[{"href":"https:\/\/gsrra.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=23123"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gsrra.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=23123"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gsrra.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=23123"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}