Moody’s revises Pakistan banking sector outlook to stable

ISLAMABAD: Moody’s Ratings has revised Pakistan’s banking sector outlook to “stable” from “positive”, citing gradual improvements in the country’s economic conditions, while warning that recovery remains slow and risks persist.

In its latest outlook report, the international credit rating agency said Pakistan’s macroeconomic environment was showing signs of gradual improvement. However, it noted that the pace of economic recovery remained subdued and expected banks’ performance to remain stable over the next 12 to 18 months.

Moody’s said high interest rates and elevated credit risks continued to weigh on the banking sector. It also described the government’s fiscal challenges as a key risk for banks.

While acknowledging emerging signs of broader economic stabilisation, the agency cautioned that risks facing the banking system had not fully receded.

Moody’s projected Pakistan’s gross domestic product growth at 3.5 per cent in 2026, but flagged ongoing concerns related to external financing and inflation. It added that policy implementation risks could also affect the sector’s outlook.