Fitch affirms Pakistan’s credit rating at ‘B-’, cites reforms and stability

ISLAMABAD: Pakistan’s long-term foreign currency issuer default rating (IDR) is at ‘B-’ with a stable outlook, as the country progresses in fiscal consolidation and improves macroeconomic stability, said the Fitch Ratings, one of the world’s top global credit agencies.

The US-based agency Monday affirmed that Pakistan’s performance remained broadly aligned with its International Monetary Fund (IMF) programme, which continues to support policy discipline and funding capacity.

According to the Fitch Ratings, foreign exchange reserves have improved over the past year, providing a cushion against external shocks, including rising tensions in the Middle East.

The agency also highlighted Pakistan’s role as a “ceasefire broker,” saying it could bring some tangible benefits and help ease external pressures.

However, the agency warned that Pakistan remains highly exposed to global energy price shocks, especially given its heavy dependence on oil imports from the Gulf.

It said any sharp rise in energy costs could strain foreign exchange reserves and economic stability.

Fitch also pointed to Pakistan’s recent staff-level agreement with the IMF, which unlocked around $1.2 billion and is expected to support further multilateral and bilateral financing.

On inflation, the agency projected an average rate of 7.9 per cent in FY26, higher than FY25 but significantly lower than the 23.4 per cent recorded in FY24. It added that energy price adjustments and targeted subsidy reforms could temporarily push prices higher.

The State Bank of Pakistan has already reduced the policy rate sharply, which has helped ease borrowing costs and support growth. Fitch expects GDP growth of 3.1 per cent in FY26, slightly above FY25 levels.

However, the agency warned that external debt repayments will rise to $12.8 billion in FY26, including a $3.5 billion repayment to the UAE. It said Pakistan will rely heavily on IMF support, multilateral inflows, and potential bond issuance to meet financing needs.

Fitch also projected that Pakistan’s current account could slip back into a small deficit of 1.1% of GDP in FY26, after a rare surplus in FY25, due to higher imports and external repayments.

Despite some improvements, the agency highlighted that Pakistan’s debt burden remains high, with government debt projected at nearly 69 per cent of GDP and interest payments consuming a large share of revenue.

It also noted that foreign exchange reserves may decline to around $21.3 billion by the end of FY26, though still providing limited coverage for external payments.

Fitch said Pakistan’s economic outlook remains fragile but stable, supported by IMF-backed reforms, improving reserves, and continued external financing flows.