Finance & Digital Economy | July 2026 | 4 min read
⚡ Quick Takeaways
- S&P Global Ratings raised Pakistan’s long-term sovereign rating to B from B-.
- The agency assigned a stable outlook after citing stronger institutions and reform progress.
- Pakistan’s transfer and convertibility assessment was also upgraded to B from B-.
- S&P linked the upgrade to IMF-backed reforms, fiscal consolidation and higher reserves.
- The agency warned that high interest costs and weaker external indicators remain key risks.
Pakistan’s return to a B sovereign rating marks a major confidence signal for the economy, but S&P Global’s report also makes clear that fiscal discipline and external financing remain central to the next phase.
| B Rating Raised from B- |
$25.3bn Reserves incl. gold by Jun 2026 |
3.5% FY2027 growth forecast |
Pakistan Regains B Rating After Nine Years
S&P Global Ratings has upgraded Pakistan’s long-term foreign and local currency sovereign credit rating to B from B-, while assigning a stable outlook. Adviser to the Finance Minister Khurram Schehzad said Pakistan has regained B ratings after nine years, noting that the country was last in this rating band in 2016-17.
The ratings agency said Pakistan has made significant progress in implementing reforms under the $7 billion IMF Extended Fund Facility. It cited stronger institutional capacity, improved macroeconomic stability, fiscal consolidation and rebuilding of foreign exchange reserves as key reasons behind the upgrade.
| Market Signal A sovereign rating upgrade can improve investor confidence, but it does not remove Pakistan’s external financing and debt-service pressures. |
Reserves and IMF Reforms Drive the Upgrade
S&P said Pakistan’s reserves, including State Bank gold holdings, rose to $25.3 billion by the end of June 2026 from $6.7 billion in December 2022. The agency said this gives the government coverage against $16.4 billion in external principal repayments over the next year.
The report also pointed to Pakistan’s return to international capital markets in April 2026 through a $750 million Eurobond and its first CNY 1.75 billion Panda bond. These transactions broadened the country’s external funding sources and helped signal renewed market access.
| Indicator | Recent Level | S&P View | Impact |
| Sovereign rating | B from B- | Stable outlook | Improved credit signal |
| FX reserves | $25.3bn | Rebuilt buffers | Stronger repayment cover |
| FY2027 deficit | Around 4% of GDP | Fiscal consolidation | Lower pressure than crisis years |
| FY2027 growth | 3.5% | Steady recovery | Moderate expansion |
Fiscal Position Improves but Debt Burden Remains High
On the fiscal side, S&P credited tax reforms and expenditure controls for faster consolidation. It expects the general government deficit to be around 4 percent of GDP in fiscal 2027, down from nearly 8 percent during the crisis years of fiscal 2022 and 2023.
The agency also expects net government debt-to-GDP to decline gradually, though it will remain above 60 percent during the forecast period. Interest payments remain one of Pakistan’s biggest weaknesses, with S&P warning that the country’s interest burden is among the highest for rated sovereigns.
| Risk Note A weakening of fiscal discipline or deterioration in external indicators could still lead to a downgrade. |
Stable Outlook Depends on Reform Continuity
The stable outlook reflects S&P’s expectation that improved political and institutional conditions will help sustain reforms, support steady growth and continue fiscal consolidation. The agency also expects Pakistan to maintain access to official financing and roll over commercial credit lines to meet external obligations.
S&P projects Pakistan’s economy to grow 3.5 percent in fiscal 2027 after 3.6 percent growth in fiscal 2026. Inflation is expected to ease gradually to 6.5 percent by fiscal 2029, while GDP per capita is forecast to approach $2,000 in fiscal 2027.
| Upgrade Path Further improvement in fiscal and external metrics could support another upgrade in the future. |
For investors and policymakers, the upgrade is a positive milestone after years of external stress. The next test will be whether Pakistan can keep reforms on track while managing energy costs, debt repayments and political pressure on fiscal policy.
Disclaimer: This article summarizes publicly reported S&P Global Ratings views and selected indicators. Ratings, forecasts and market conditions may change with new official data or agency updates.
