Fitch Ratings has affirmed Pakistan’s long-term sovereign debt ratings at ‘B-’ and assigned a ‘RR4’ Recovery Rating, following the removal of the country’s ratings from Under Criteria Observation (UCO), the agency said on Wednesday.
The decision reflects the application of Fitch’s new Sovereign Rating Criteria, effective September 2025, which for the first time incorporates recovery assumptions into sovereign debt ratings.
Fitch said the senior unsecured long-term debt ratings of Pakistan and The Pakistan Global Sukuk Programme Company Limited have been equalised with the country’s Long-Term Foreign-Currency Issuer Default Rating (IDR). This reflects the agency’s expectation of average recovery prospects in a default scenario, given Pakistan’s high general government debt levels, elevated interest payments relative to revenue, and the absence of factors warranting notching above or below the IDR.
Pakistan’s long-term foreign-currency IDR was upgraded to ‘B-’ with a stable outlook on April 15, 2025, from ‘CCC+’.
Fitch reiterated that ratings from ‘AAA’ to ‘BBB’ are considered investment grade, while ‘BB’ to ‘D’ fall into speculative grade, noting that these classifications are market conventions and do not constitute investment advice.
On governance factors, Fitch assigned Pakistan an ESG Relevance Score of 5 for political stability and rights, rule of law, institutional and regulatory quality, and control of corruption. These scores reflect the significant weight of World Bank Governance Indicators, with Pakistan currently ranking at the 22nd percentile.
Rating sensitivities
Fitch warned that Pakistan could face a downgrade if government debt and debt-servicing metrics fail to improve or if external liquidity pressures intensify, including due to delays in IMF programme reviews or weaker policy discipline.
Conversely, an upgrade could be triggered by meaningful reductions in government debt and debt-servicing burdens, particularly through fiscal consolidation aligned with IMF commitments, stronger tax revenue generation, and a sustained improvement in foreign-exchange reserves beyond Fitch’s current forecasts.
The agency also highlighted that a greater ability to secure external financing would support a positive rating action going forward.
