Moody’s has raised Pakistan one notch to Caa1 and assigned a stable outlook. The move reflects a clearer external position and measurable progress under the IMF program.
The ratings agency pointed to stronger foreign exchange reserves and recent funding steps as the main drivers. It said the country has rebuilt buffers and that creditor confidence has improved.
Officials told Moody’s that IMF reviews and disbursements have supported the balance of payments. These steps helped to ease immediate external pressures and to widen options for official and commercial financing. The S&P upgrade earlier this year added to that momentum.
Moody’s also noted a gradual strengthening of the fiscal position. The agency highlighted an expanding tax base and rising revenues as evidence that public finances are moving away from prior weakness. This fiscal progress contributes directly to lower debt service risk.
The agency warned that gains are still fragile. Delays in official financing or slippage in planned reforms would weaken the external position again. Continued policy follow-through and timely disbursements remain essential for further rating gains.
Market reaction was positive after the announcement. Sovereign bond spreads tightened, and investor sentiment improved. Policymakers said they will press ahead with reforms to lock in the upgrade and to restore normal market access over time.
Pakistan’s upgrade to Caa1 opens space to reduce borrowing costs and to attract overseas debt. The gains will depend on the concrete delivery of the reform agenda and on steady reserve trends.