Fitch upgrades Pakistan’s credit rating to ‘B-’

Global ratings agency Fitch upgraded Pakistan’s foreign currency credit rating to ‘B-’ from ‘CCC+’ on Tuesday, citing improved fiscal performance and confidence in the country’s economic reforms.

The upgrade reflects Pakistan’s progress in narrowing its budget deficits and commitment to structural reforms, supporting its International Monetary Fund (IMF) program performance.

Fitch noted that Pakistan’s fiscal performance has improved, with the government’s budget deficit expected to narrow to 6% of GDP in FY25, and a primary surplus anticipated to exceed 2% of GDP.

The agency also highlighted Pakistan's policy credibility and fiscal discipline, although it warned that challenges remain, including high debt levels and inflationary pressures.

Despite global trade tensions and the risks from external pressures, Fitch stated that Pakistan’s lower reliance on exports and market financing would help mitigate potential risks.

The agency forecasted GDP growth of 3% in FY25 and a decline in inflation to 5%. It also predicted a further buildup of foreign reserves, following strong remittance inflows and favorable import prices.

The rating upgrade signals positive momentum, but Fitch also cautioned about potential risks from political instability and external market conditions.