ISLAMABAD: Fitch Ratings on Monday affirmed Pakistan’s long-term foreign currency issuer default rating at ‘B-’ with a stable outlook, citing progress in fiscal consolidation and macroeconomic stability supported by the country’s programme with the International Monetary Fund.
In a statement, the agency said Pakistan’s policy measures were broadly in line with IMF requirements, helping strengthen funding capacity.
It added that foreign exchange buffers had improved over the past year, providing a cushion against external shocks, including the economic impact of the ongoing Middle East conflict.
Fitch also noted that Pakistan’s diplomatic role in facilitating a ceasefire could yield “tangible benefits” and partly offset external pressures.
The rating agency said Pakistan reached a staff-level agreement with the IMF in March, unlocking about $1.2 billion under its loan programmes.
The programme would continue to serve as a key policy anchor, particularly for fiscal management, and help mobilise further multilateral and bilateral financing, Fitch said.
It added that Pakistan plans to tap international markets, including through the issuance of a panda bond during the current fiscal year.
Despite improvements, Fitch warned that Pakistan remains highly exposed to global energy price shocks.
“Pakistan sources up to 90% of oil from the Gulf and has limited storage capacity,” the agency said, noting that disruptions linked to tensions around the Strait of Hormuz could constrain supply.
It added that fuel subsidies introduced since early March had been financed through expenditure reallocation, while costs were partly offset by higher pump prices and a shift to more targeted support from April.
Fitch said the overall fiscal impact was expected to remain contained, as the government was likely to cut spending elsewhere.
The agency projected inflation to increase in the coming months due to higher global energy prices and subsidy adjustments.
It forecast average inflation at 7.9% in FY26, above FY25 levels but significantly lower than 23.4% recorded in FY24.
Pakistan’s central bank, the State Bank of Pakistan, has cut its policy rate to 10.5% by the end of 2025 from 22% in May 2024, helping ease borrowing costs and support economic activity.
Fitch said economic growth was expected to rise slightly to 3.1% in FY26 from 3.0% in FY25, driven by improved confidence and lower interest rates.
However, it cautioned that the energy shock would weigh on overall growth.
