Finance & Digital Economy Desk | April 2026 | 4 min read
| ⚡ Quick Takeaways
• Fitch has affirmed Pakistan’s long-term foreign currency rating at ‘B-‘ with a stable outlook. • The rating reflects progress on fiscal consolidation and macro stability broadly aligned with the IMF programme. • Pakistan’s role as a ceasefire broker is cited as a potential tangible benefit that may partly offset external pressures. • Foreign exchange reserves are projected to fall to $21.3 billion by end-FY26, covering 2.9 months of external payments. • Key risks include energy price exposure, rising external debt amortisations of $12.8 billion in FY26, and Pakistan-Afghanistan tensions. |
Fitch Ratings has maintained Pakistan’s sovereign credit rating at ‘B-‘ with a stable outlook, offering a measured endorsement of the country’s reform trajectory while flagging a cluster of risks that could derail progress. The affirmation is neither an upgrade nor a warning shot — it is a holding pattern that reflects genuine improvements in fiscal management set against a fragile external position and rising energy-related vulnerabilities.
By The Numbers
| Indicator | Figure | Fitch Projection |
| Credit Rating | B- / Stable Outlook | Affirmed — no upgrade or downgrade |
| GDP Growth FY26 | 3.1% | Up slightly from 3.0% in FY25 |
| FX Reserves (End-FY26) | $21.3 Billion | 2.9 months of external payments coverage |
What the Affirmation Actually Means
A ‘B-‘ rating with a stable outlook from Fitch sits in the speculative-grade category — commonly referred to as sub-investment grade or high yield. It signals that Pakistan meets its current financial obligations but carries material credit risk, particularly in adverse scenarios. The stable outlook indicates that Fitch does not anticipate changing the rating in the near term, provided conditions remain broadly on track.
The rating agency cited two pillars: progress on fiscal consolidation aligned with the IMF programme, and the rebuilding of foreign exchange reserves over the past year. It also acknowledged Pakistan’s ceasefire broker role as a factor that may generate tangible economic benefits — an unusual geopolitical variable in a credit assessment.
| 🔵 What ‘B-‘ Means for Borrowing Costs
Sub-investment grade ratings typically translate into higher yields demanded by international investors on sovereign bonds. Pakistan’s B- rating means it pays a premium to borrow on global markets compared to investment-grade peers. Any upgrade — even to B — would meaningfully reduce the cost of external financing. |
Key Economic Projections: FY26 at a Glance
Fitch’s accompanying projections paint a picture of modest recovery constrained by structural vulnerabilities. The table below summarises the agency’s key forecasts across fiscal, monetary, and external indicators:
| Metric | FY24 | FY25 | FY26 (Projected) | Direction |
| Inflation (avg) | 23.4% | ~7.9%↓ | 7.9% | 🟢 Declining |
| SBP Policy Rate | 22% | 10.5% | TBD | 🟢 Cut sharply |
| GDP Growth | — | 3.0% | 3.1% | 🟢 Slight rise |
| Govt Debt / GDP | — | 70.7% | 68.9% | 🟡 Gradual decline |
| Primary Surplus / GDP | — | Above target | 2.1% | 🟡 Narrowing |
| Fiscal Deficit / GDP | — | ~5.3% | ~5.3% | 🟡 Stable |
| External Amortisations | — | ~$8bn | $12.8bn | 🔴 Rising sharply |
| FX Reserves | — | $22.6bn | $21.3bn | 🔴 Expected fall |
Energy Exposure: The Central Risk
The most pointed risk flagged by Fitch centres on Pakistan’s dependence on Gulf energy supplies. The country sources approximately 90 per cent of its oil imports from the Gulf region and maintains limited domestic storage capacity — a combination that creates acute exposure to any disruption in the Strait of Hormuz. Fitch noted that fuel subsidies introduced since early March had been funded through expenditure reallocation rather than fresh borrowing, and that the switch to a more targeted subsidy framework from April should help contain fiscal damage.
On inflation, the agency projects an average of 7.9 per cent for FY26 — markedly lower than the 23.4 per cent recorded in FY24, but higher than FY25 levels as energy price pressures and subsidy changes feed through to consumers.
| ⚠️ 90% Oil Dependency — A Structural Vulnerability
Pakistan’s near-total reliance on Gulf crude, combined with minimal strategic reserves, means any escalation in Middle East tensions could trigger a rapid deterioration in both the trade deficit and foreign exchange reserves. This is the single variable most capable of derailing the current stable outlook. |
External Debt and Reserve Pressures
Fitch projects external debt amortisations of $12.8 billion in FY26 — up from roughly $8 billion the previous year — as legacy bilateral deposits mature. The UAE’s $3.5 billion deposit repayment in April is captured in this figure, though Fitch notes that $9.2 billion in bilateral deposits and loans from other partners are expected to be rolled over rather than repaid outright.
Foreign exchange reserves are forecast to fall from $22.6 billion at end-FY25 to $21.3 billion by end-FY26, covering 2.9 months of external payments. Fitch also noted that net reserves remain negative once commercial bank deposits, a Chinese swap line, and bilateral SBP deposits are excluded — an important technical caveat on the headline reserve figure.
| ✅ What Is Holding the Rating Stable
Despite the pressures, Fitch’s stable outlook rests on three anchors: the IMF programme as a policy framework, anticipated multilateral and bilateral inflows to cover financing needs, and a gradual decline in the government debt-to-GDP ratio — projected to move from 70.7% to 68.9% in FY26. |
DISCLAIMER: All information in this article is based on publicly available data and official statements. This content is intended for general informational purposes only.
