Moody’s upgrades Pakistan’s ratings to Caa2 citing improved macroeconomic conditions 

A sign for Moody's rating agency stands in front of the company headquarters in New York, September 18, 2012. (AFP/FILE)
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Updated 28 August 2024
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Moody’s upgrades Pakistan’s ratings to Caa2 citing improved macroeconomic conditions 

  • Ratings upgrade reflects Pakistan’s decreased default risk after $7 billion IMF bailout staff-level agreement in July
  • Despite doubling since June 2023, Pakistan’s foreign reserves remain insufficient for external financing needs, says Moody’s 

ISLAMABAD: International credit ratings agency Moody’s on Wednesday upgraded Pakistan’s ratings to Caa2 from Caa3 and changed the country’s outlook to “positive” citing improving macroeconomic conditions and better government liquidity and external position. 

The ratings upgrade reflects Pakistan’s decreased default risk after a $7 billion IMF bailout staff-level agreement in July.

However, despite doubling since June 2023, Pakistan’s foreign exchange reserves remain insufficient for its external financing needs, the agency said. 

“The upgrade to Caa2 reflects Pakistan’s improving macroeconomic conditions and moderately better government liquidity and external positions, from very weak levels,” the ratings agency said. “Accordingly, Pakistan’s default risk has reduced to a level consistent with a Caa2 rating.”

The agency said Pakistan’s Caa2 rating continues to reflect the country’s “very weak debt affordability,” saying that it drives high debt sustainability risk. Moody’s said it expects interest payments to continue absorbing about half of government revenue over the next two to three years.

“The Caa2 rating also incorporates the country’s weak governance and high political uncertainty,” it said. 

Moody’s said that sustained reform implementation, which includes revenue-raising measures, can increase the government revenue base and improve Pakistan’s debt affordability. 

It said completing IMF reviews in a timely manner would also allow Pakistan to continually unlock financing from official partners, sufficient to meet its external debt obligations and support further rebuilding of its foreign exchange reserves.

Moody’s said that while it expects Pakistan to cover its financing needs with funding from official partners, there remains “uncertainty” around the government’s ability to sustain reform implementation. 

It cautioned that a weak coalition government formed after the February election this year may not be able to take revenue-raising measures without stoking social tensions. 

“Slippages in reform implementation or results could lead to delays in or withdrawal of financing support from official partners,” Moody’s warned. 


Pakistan expands pilgrim travel system for Iran, Iraq with licenses to 67 new operators

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Pakistan expands pilgrim travel system for Iran, Iraq with licenses to 67 new operators

  • New system requires all Iraq-Iran pilgrimages to be organized by licensed groups under state oversight
  • Long-running “Salar” model relied on informal caravan leaders, leading to overstays and missing pilgrims

ISLAMABAD: Pakistan has issued registration certificates to 67 additional licensed pilgrimage companies, expanding a tightly regulated travel system designed to curb overstays, undocumented migration and security risks linked to religious travel to Iran and Iraq, the ministry of religious affairs said on Tuesday.

The move is part of a broader overhaul of Pakistan’s pilgrim management framework after authorities confirmed that tens of thousands of Pakistani pilgrims had overstayed or gone missing abroad over the past decade, raising concerns with host governments and triggering diplomatic pressure on Islamabad to tighten oversight.

“The dream of safe travel for pilgrims to Iran and Iraq through better facilities and a transparent mechanism is set to be realized,” the religious affairs ministry said in a statement, quoting Federal Minister for Religious Affairs Sardar Muhammad Yousaf, who announced that 67 new Ziyarat Group Organizers had been registered.

Pakistan’s government has dismantled the decades-old “Salar” system, under which informal caravan leaders arranged pilgrimages with limited state oversight. The model was blamed for weak documentation, poor accountability and widespread overstays, particularly during peak pilgrimage seasons. 

Under the new framework, only licensed companies are allowed to organize pilgrimages, and they are held directly responsible for ensuring pilgrims return within approved timelines.

Authorities say pilgrimages to Iran and Iraq will be conducted exclusively under the new system from January 2026, marking a full transition to regulated travel. The religion ministry said it has now completed registration of 24 operators in the first phase and 67 more in the second, with remaining applicants urged to complete documentation to obtain licenses.

The religious affairs ministry said a digital management system is being developed with the National Information Technology Board to monitor pilgrim movements and operator compliance, while a licensed ferry operator has also secured approval to explore future sea travel options.

The overhaul has been accompanied by tighter coordination with host countries. Earlier this month, Pakistan and Iraq agreed to share verified pilgrim data and restrict entry to travelers cleared under the new system, following talks between interior ministers in Islamabad and Baghdad. Pakistan has also barred overland pilgrim travel for major religious events, citing security risks in its southwestern Balochistan province, meaning travel to Iran and Iraq is now limited to approved air routes.

Officials say the reforms are aimed at balancing facilitation with accountability, as tens of thousands of Pakistani pilgrims travel annually to key Shia shrines, including Karbala and Najaf in Iraq and Mashhad and Qom in Iran. Travel peaks during religious occasions such as Arbaeen, when millions of worshippers converge on Iraq, placing heavy logistical and security demands on regional authorities.

The government says the new system is intended to restore confidence among host countries while ensuring safer, more transparent travel for Pakistani pilgrims.