Pakistan's Economic Rebound Gains Momentum with Credit Rating Uplifts

Strategic Insights -

Pakistan's economic resilience has been vindicated by recent credit rating upgrades, with Moody's Investors Service upgrading the country's sovereign rating, citing improvements in foreign exchange reserves, a current account surplus, and fiscal consolidation. The move is expected to ease access to global capital markets and attract investment, as Pakistan looks to consolidate gains under its $7 billion IMF program approved in September 2024.

The turnaround was made possible through a combination of factors, including a dramatic reduction in inflation, which dropped from 38 percent in May 2023 to a record low of 3.2 percent in June 2025. The State Bank of Pakistan (SBP) has also reduced its policy rate in seven steps from 22 percent to 11 percent since June 2024, in line with the improved outlook. External accounts have strengthened, with reserves nearly tripling to $14.5 billion by the end of FY25 from $4.4 billion two years earlier.

Governor Jameel Ahmad attributed the turnaround to a $2.1 billion current account surplus - the first in 14 years - and record remittances of $38.3 billion from overseas Pakistanis, without adding to external debt. Additionally, the SBP has made significant strides in digitalization, spinning off the Raast instant payment system into a separate subsidiary, easing account opening procedures, and modernizing payment infrastructure to widen financial inclusion.

Key Takeaways:

  • Pakistan's economic resilience has been recognized by international credit rating agencies, including Moody's Investors Service, which upgraded the country's sovereign rating.
  • The upgrade was based on improvements in foreign exchange reserves, a current account surplus, and fiscal consolidation.
  • The State Bank of Pakistan (SBP) has reduced its policy rate in seven steps from 22 percent to 11 percent since June 2024.
  • Inflation has reached a record low of 3.2 percent in June 2025, down from 38 percent in May 2023.
  • External accounts have strengthened, with reserves nearly tripling to $14.5 billion by the end of FY25 from $4.4 billion two years earlier.
  • The $2.1 billion current account surplus is the first in 14 years, and record remittances of $38.3 billion from overseas Pakistanis have helped to strengthen the economy.
  • The SBP's digital push has included spinning off the Raast instant payment system into a separate subsidiary and modernizing payment infrastructure to widen financial inclusion.

Statistics:

  • Reserve growth: $14.5 billion by the end of FY25, up from $4.4 billion two years earlier.
  • Current account surplus: $2.1 billion, the first in 14 years.
  • Record remittances: $38.3 billion from overseas Pakistanis.
  • Policy rate reduction: 11 percentage points since June 2024.
  • Inflation rate: 3.2 percent in June 2025, down from 38 percent in May 2023.

Sources:

  • "Pakistan's credit rating upgraded by Moody's, says State Bank of Pakistan". (Source: Reuters)
  • "Moody's upgrades Pakistan's sovereign rating". (Source: Business Recorder)
  • State Bank of Pakistan press release (Source: SBP)