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The international credit ratings agency Moody’s revised Pakistan’s outlook from stable to positive, signalling growing confidence in the country’s economic recovery efforts.
The upgrade comes after Pakistan’s recent efforts to stabilize its economy, which has been under severe strain due to a combination of political instability, high inflation, and a dwindling foreign exchange reserve. Moody’s noted that Pakistan’s macroeconomic indicators have shown signs of improvement, particularly following the approval of a $3 billion bailout package by the International Monetary Fund (IMF) in July 2024. The IMF program is designed to support Pakistan’s economic reforms, enhance fiscal discipline, and stabilize the country’s external position.
Moody’s also highlighted that the Pakistani government has made significant progress in implementing critical reforms aimed at improving tax collection, controlling public sector debt, and managing inflation. These measures have helped to restore investor confidence, which is reflected in the improvement of the country’s sovereign credit rating.
Moreover, the agency acknowledged Pakistan’s efforts in securing external financing from bilateral and multilateral partners, which has been crucial in preventing a balance of payments crisis. This financial support, combined with the government’s reform agenda, has contributed to a more positive outlook for Pakistan’s economy.
Moody’s cautioned that Pakistan still faces significant challenges, including political uncertainties and structural economic weaknesses that could pose risks to the country’s recovery. The agency emphasized the importance of continued reforms, particularly in areas such as energy sector governance, public financial management, and the business environment, to ensure sustainable economic growth.
The upgrade by Moody’s is expected to have a positive impact on Pakistan’s financial markets, potentially lowering borrowing costs and attracting foreign investment. The government of Pakistan has welcomed the upgrade, viewing it as a validation of its ongoing economic reforms and a step towards regaining the confidence of international investors.