Fitch has upgraded Pakistan’s long-term foreign-currency issuer default rating (IDR) to CCC+ from CCC, following the country’s new deal with the International Monetary Fund (IMF).
“The upgrade reflects greater certainty over the continued availability of external funding, in the context of Pakistan’s staff-level agreement (SLA) with the IMF on a new 37-month $7 billion extended fund facility (EFF),” Fitch stated on Monday.
Previously rated at the speculative CCC level, indicating a high risk of default, the new CCC+ rating still represents significant credit risk. However, Fitch cited increased certainty over Pakistan’s access to external funding as the reason for the upgrade.
The rating upgrade is linked to Pakistan’s recently finalized staff-level agreement with the IMF on a 37-month, $7 billion EFF. This program is expected to help Pakistan achieve macroeconomic stability and pave the way for stronger, more inclusive, and resilient economic growth, according to the IMF.
Fitch Warns Political Turmoil Could Threaten Pakistan’s Economic Stability
Fitch noted that Pakistan’s effective performance under its previous IMF agreement helped narrow fiscal deficits and rebuild foreign exchange reserves, improvements expected to continue. However, the agency warned that the country would remain vulnerable if it fails to implement challenging reforms.
The upgraded rating also assumes that Pakistan will secure around $4 to $5 billion in new funding assurances from key bilateral partners, such as Saudi Arabia, the UAE, and China, by the end of August.