Improved reserves, IMF alignment and fiscal reforms support stability, but external risks persist
ISLAMABAD: Fitch Ratings has affirmed Pakistan’s long-term foreign currency issuer default rating at ‘B-’ with a stable outlook, citing progress in fiscal consolidation and macroeconomic stability.
The agency said Pakistan’s economic performance remains broadly aligned with its program under the International Monetary Fund, which continues to anchor policy discipline and strengthen funding access. Improved foreign exchange reserves over the past year have provided a buffer against external shocks, including geopolitical tensions in the Middle East.
Fitch also acknowledged Pakistan’s emerging diplomatic role as a ceasefire broker, noting it could yield economic and external sector benefits. However, the agency cautioned that the country remains vulnerable to global energy price fluctuations due to its reliance on imported oil.
The report highlighted a recent staff-level agreement with the IMF, unlocking approximately $1.2 billion and paving the way for additional multilateral and bilateral financing. Inflation is projected to average 7.9 percent in FY26, rising from FY25 but significantly below FY24 levels, amid expected energy price adjustments and subsidy reforms.
Pakistan’s central bank has eased monetary policy, supporting growth, with GDP forecast at 3.1 percent in FY26. However, external debt obligations are set to increase to $12.8 billion, intensifying reliance on external financing sources.
Fitch warned that while stability is improving, high debt levels and external vulnerabilities continue to pose risks to Pakistan’s economic outlook.
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