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Moody’s Raises Pakistan Sovereign Rating to Caa1, Warns Reserves Remain Fragile

Moody’s cited IMF programme progress, fresh multilateral lending, improved fiscal metrics — it flagged debt affordability as very weak

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Overview

  • Moody’s Investors Service upgraded Pakistan’s sovereign credit rating to Caa1 from Caa2 on August 13, 2025, and assigned a stable outlook.
  • The move follows July’s B-level upgrades by S&P Global Ratings and Fitch Ratings, reflecting growing confidence tied to policy commitments.
  • Pakistan completed its first IMF review in May 2025, unlocking a $1 billion disbursement, and secured a $1 billion commercial loan in June 2025 backed by a $500 million ADB guarantee.
  • Foreign exchange reserves rose to $14.3 billion by late July, up from $9.4 billion a year earlier, yet remain below levels needed for full external debt coverage.
  • Moody’s warned that government debt affordability remains among the weakest globally and cautioned that reform slippage or reduced financing support could reverse recent gains.