Moody's Upgrades Pakistan Credit Rating to B3

Moody's Ratings upgraded Pakistan's sovereign credit rating from Caa1 to B3 with a stable outlook on Monday. The agency cited a stronger external position and improved fiscal metrics, noting that foreign-exchange reserves have risen to $17.1 billion. These factors, alongside lower domestic financing costs, have materially improved the country's debt affordability.

While the ratings firm indicated that Pakistan shows greater resilience to external shocks, including the Middle East conflict, it warned that the credit profile remains vulnerable. This vulnerability stems from a narrow revenue base and fragile external finances. This move follows a similar upgrade by S&P Global Ratings in July.

Pakistan's dollar bonds saw gains following the announcement, specifically the note maturing in 2051. The upgrade is expected to help the government reduce its risk premium and regain access to international commercial bond markets.