S&P Global upgrades Pakistan’s credit rating to ‘B’

WEB DESK: Global rating agency S&P Global has upgraded Pakistan’s credit rating from B-minus to B, citing progress on IMF programme implementation and institutional stability.

Pakistan’s rating outlook was held at “stable” as sustained official financing is expected to help the country meet ​its external obligations while allowing it to continue rolling ​over commercial credit lines over the next 12 ⁠months. The agency said the government’s efforts to widen the tax ​base have improved revenue collection and accelerated fiscal consolidation, supporting ​a gradual decline in the country’s debt burden.

Reforms backed by the IMF have helped restore macroeconomic stability, rebuild foreign exchange reserves and ease ​strains on Pakistan’s fiscal and external positions, S&P said. Tax ​reforms and continued foreign inflows have also strengthened the country’s fiscal and ‌external ⁠buffers against potential external shocks, the rating agency said.

The upgrade comes as Pakistan reportedly seeks additional external financing, including a proposed USD10 billion exchange stabilisation facility from the United States, Reuters reported earlier ​on Wednesday, citing ​a source. If ⁠agreed on, the facility would bolster Pakistan’s foreign exchange reserves, ease pressure on the currency ​and reduce its reliance on multilateral financing, even ​as ⁠Islamabad pursues tighter fiscal and monetary policies in line with its IMF program.

S&P forecast Pakistan’s economy would grow 3.5% in fiscal ⁠year ​2027 and expects only marginal price ​pressures from an energy price shock stemming from the conflict in the Middle ​East.

Earlier this year, in April, Fitch Ratings reaffirmed Pakistan’s long-term foreign currency Issuer Default Rating (IDR) at ‘B-‘ with a stable outlook, while cautioning that the country’s vulnerability to fluctuations in global energy prices remained a significant risk, particularly if higher import costs eroded foreign exchange reserves.

Separately, S&P Global Ratings upgraded Pakistan’s sovereign credit rating from ‘CCC+’ to ‘B-‘ last year and assigned the country a stable outlook, reflecting an improvement in its credit profile.