Moody’s revises Pakistan banking sector outlook to stable

International credit rating agency Moody’s on Monday revised Pakistan’s banking sector outlook from positive to stable, stating that the country’s economy is gradually moving towards recovery.

In its assessment, Moody’s said it has changed the outlook for Pakistan’s banking system to stable as the operating environment for banks is slowly improving, while economic and financial conditions are showing signs of gradual stabilisation.

However, the agency noted that banks’ financial performance is expected to remain stable over the next 12 to 18 months, as pressure on asset quality and profitability is likely to persist.

Moody’s said the banking sector outlook remains closely linked to the Government of Pakistan’s rating (stable, Caa1), as nearly half of banks’ assets consist of government securities.

The agency added that Pakistan’s long-term debt sustainability remains uncertain due to a weak fiscal position and rising liquidity and external risks.

Moody’s forecast that real GDP growth will reach around 3.5 per cent in 2026, up from 3.1 per cent in 2025, supported by ongoing economic reforms that have helped improve investor confidence and gradually stabilise economic activity.