ISLAMABAD: Fitch Ratings on Wednesday affirmed Pakistan’s long-term foreign- and local-currency debt ratings at B- and assigned a Recovery Rating of RR4 after removing the ratings from Under Criteria Observation. According to an official release, the action followed the application of Fitch’s new Sovereign Rating Criteria, effective from September 2025, which for the first time incorporates recovery assumptions into sovereign debt assessments.
Under the updated framework, Fitch continues to classify sovereign ratings from ‘AAA’ to ‘BBB’ as investment grade and from ‘BB’ to ‘D’ as speculative grade, with plus or minus modifiers for relative risk differences. However, the agency stressed that these market conventions do not constitute investment advice. Instead, they signal varying levels of credit risk or default probability.
Governance, risks and outlook highlighted
Meanwhile, Fitch equalised Pakistan’s senior unsecured long-term debt ratings, including those of The Pakistan Global Sukuk Programme Company Limited, with the country’s Long-Term Foreign-Currency Issuer Default Rating. The agency cited expectations of average recovery prospects in a default scenario, given Pakistan’s high government debt and interest-payment burdens, and the absence of factors warranting upward or downward notching.
Earlier, on April 15, 2025, Fitch upgraded Pakistan’s Long-Term Foreign-Currency IDR to B- with a stable outlook from CCC+, reflecting improved external financing conditions. Nevertheless, the agency flagged governance challenges, assigning Pakistan an ESG Relevance Score of 5 for political stability, rule of law, and control of corruption, consistent with its World Bank Governance Indicators ranking at the 22nd percentile.
Looking ahead, Fitch warned that renewed external liquidity stress, delays in IMF programme reviews, or rising debt-servicing pressures could trigger a downgrade. Conversely, sustained fiscal consolidation, declining debt burdens, and stronger tax revenue generation aligned with IMF commitments could support an upgrade over time.
