Credit Rating Remains Stable Amid IMF Support and Fiscal Reforms
Fitch Ratings has reaffirmed Pakistan’s long-term foreign currency issuer default rating (IDR) at “B-” with a stable outlook. The global agency said the decision reflects progress in fiscal consolidation and improving macroeconomic stability.
The US-based rating agency noted that Pakistan’s economic performance broadly aligns with its International Monetary Fund (IMF) programme. As a result, the country’s funding capacity has improved compared to previous years.
Fitch also highlighted that foreign exchange reserves have been rebuilt over the past year. Therefore, Pakistan now holds a stronger cushion against external shocks, including regional instability and energy disruptions.
In addition, the agency acknowledged Pakistan’s diplomatic role in regional conflict resolution. It said such engagement may provide limited but meaningful economic and strategic benefits.
However, Fitch warned that risks remain high. In particular, exposure to global energy price volatility continues to threaten external stability.
IMF Programme and Fiscal Discipline Support Outlook
Fitch pointed out that Pakistan reached a staff-level agreement with the IMF in March. This agreement unlocked around $1.2 billion in financial support.
Moreover, the agency said the IMF programme continues to serve as a key policy anchor. It supports fiscal discipline and helps mobilise additional multilateral and bilateral financing.
At the same time, Fitch stressed that Pakistan remains vulnerable to energy supply disruptions. The country imports nearly 90 percent of its oil from the Gulf region. Consequently, any conflict-related disruption in shipping routes such as the Strait of Hormuz could create pressure on reserves.
To manage costs, the government has adjusted fuel pricing and reallocated budget spending. Even so, Fitch expects inflation to rise due to higher global energy prices. It forecasts average inflation at 7.9 percent in FY26, compared to lower levels in FY25.
Furthermore, the State Bank of Pakistan has already reduced interest rates significantly. However, inflation concerns linked to energy supply pressures have pushed interbank rates slightly higher in recent months.
Despite these challenges, Fitch expects Pakistan’s economy to grow by 3.1 percent in FY26. This growth is supported by improved investor confidence and lower borrowing costs.
Debt Pressures Persist Despite Gradual Improvement
Fitch also raised concerns about rising external debt repayments. It estimated amortisations at $12.8 billion in FY26, up from nearly $8 billion in FY25.
In addition, Pakistan recently repaid a $3.5 billion deposit to the United Arab Emirates. The agency noted that further bilateral deposits may still be rolled over to ease pressure.
Fitch expects Pakistan to rely heavily on IMF funds, multilateral support, and commercial borrowing. It also mentioned plans for a panda bond issuance during the fiscal year.
On fiscal balance, the agency projected a primary surplus of 2.1 percent of GDP in FY26. However, it warned that rising expenditures and limited tax reform capacity could weaken gains.
Public debt remains high at nearly 69 percent of GDP. Although a gradual decline is expected, interest payments continue to consume a large share of revenue.
Meanwhile, the current account is expected to return to a deficit of 1.1 percent of GDP. Fitch linked this to energy imports and currency pressures despite earlier stabilisation gains.
Finally, the agency flagged regional tensions, including rising Pakistan–Afghanistan friction. While it expects limited economic impact, it warned that instability could challenge fiscal discipline.
