Fitch, a global credit rating agency, has upgraded Pakistan’s credit rating to CCC+ from CCC, reflecting a decreased risk of external funding challenges. This upgrade stems from Pakistan’s recent securing of a new bailout package from the International Monetary Fund (IMF).
The rating agency highlighted that while Pakistan remains below investment grade, the likelihood of a default has diminished. This improvement is attributed to increased confidence in the continued availability of external funding, particularly in light of the staff-level agreement (SLA) reached between Pakistan and the IMF for a new $7 billion Extended Fund Facility (EFF) spanning 37 months.
The previous, shorter-term IMF arrangement yielded positive results, enabling Pakistan to reduce fiscal deficits and rebuild foreign exchange reserves. Fitch anticipates further progress in these areas.
The SLA, reached on July 12th, necessitates Pakistan securing additional funding assurances from key bilateral partners, primarily Saudi Arabia, the UAE, and China, totaling approximately $4 billion to $5 billion over the EFF’s duration. Fitch expressed confidence in Pakistan’s ability to achieve this, citing a strong track record of support from these partners and recent budgetary measures aimed at fiscal year ending June 2025 (FY25).
Pakistan anticipates final approval of the $7 billion loan deal from the IMF by the end of August. The IMF views this program as a means of solidifying macroeconomic stability and fostering more inclusive and resilient growth.
Supportive actions from creditor nations like China, Saudi Arabia, and the UAE have aided Pakistan in managing its foreign debt obligations. The country’s coalition government has simultaneously implemented stringent reforms, including broadening the tax net and curtailing spending on energy subsidies.
Last July, Fitch had upgraded Pakistan’s long-term foreign currency issuer default rating from ‘CCC-‘ to ‘CCC’ following the approval of an IMF loan. However, the rating still reflected a considerable country credit risk.
The latest upgrade has been welcomed by Prime Minister Shehbaz Sharif, who commended the efforts of Finance Minister Muhammad Aurangzeb and his team. Sharif stated that Pakistan is reaping the benefits of the government’s policy of prioritizing the nation’s interests over political considerations. He described the rating upgrade as international recognition of his government’s sound economic policies, emphasizing that the government is actively pursuing economic reforms that will ultimately benefit the people.
Sharif underscored the importance of reports from Fitch and other international financial institutions in fostering economic improvement for Pakistan. He declared the government’s commitment to continued efforts and dedication to economic progress.
