ISLAMABAD: International ratings agency S&P Global improved Pakistan’s credit rating from ‘B-’ to ‘B’ on Wednesday, citing strengthening institutional capacity based on the government’s successful implementation of economic reforms recommended by the International Monetary Fund (IMF).
Pakistan entered into a $7 billion loan program with the IMF in September 2024 and has since then undertaken several economic reforms mandated by the lender for bailout funds. These reforms include the privatization of loss-making state-owned enterprises, increasing Pakistan’s tax base and removing subsidies from energy and fuel, among others.
The ratings agency said in its report that Pakistan’s “stable” outlook reflects the South Asian country’s improved political and institutional settings. It said entrenched economic reforms will bring about a sustained period of steady growth and fiscal consolidation for Pakistan.
“The government’s efforts to expand its revenue base have hastened the pace of fiscal consolidation, facilitating a steady decline in its net general government debt to GDP ratio,” S&P Global said.
“We therefore raised our long-term sovereign rating on Pakistan to ‘B’. At the same time, we affirmed the ‘B’ short-term rating.”
The report noted that Pakistan’s foreign exchange reserves had climbed to $25.3 billion at the end of June 2026 from $6.7 billion in December 2022.
It said these funds are “more than sufficient” to cover the government’s external principal payments of $16.4 billion over the next 12 months.
S&P Global credited Pakistan’s government for “significantly” increasing tax revenues by 3.2 percentage points of the GDP in the 12 months to June 2025. It said tax revenue collection has continued this momentum in fiscal 2026 that ended in June 2026.
In April 2026, Pakistan entered international capital markets for the first time in four years with a $750 million Eurobond and an inaugural panda bond issuance of $250 million.
“We believe multilateral and bilateral funding, coupled with continued access to commercial borrowing, will diversify Pakistan’s external funding options,” it added.
The report said Pakistan’s economy grew by 3.6 percent in fiscal year 2026 on the back of industry and services sector growth. It observed that the growth of the agriculture sector, a critical one that accounts for 23 percent of the economic output, demonstrated “resilience” despite floods in the first quarter of fiscal year 2026.
“Pakistan will maintain GDP growth of 3.5 percent in fiscal 2027 as reforms lift economic activity,” the ratings agency predicted.
