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Bond Market News
Pakistan Upgraded to B- on Stronger External Metrics
July 25, 2025
Pakistan has been upgraded to B- from CCC+ by S&P, citing restored macro stability, improving external buffers and a more predictable funding environment. The $7bn Extended Fund Facility (EFF) program by the IMF in September 2024 restored Pakistan with much needed macroeconomic stability. Foreign reserves, including gold holdings, have climbed up to $20.5bn, vs. the low level of $6.7bn seen in December 2022 when S&P downgraded the sovereign to CCC+.
The current level of reserves is sufficient to cover the government’s external principal and interest payments of $13.4bn for FY2026. Pakistan also posted an annual surplus of 0.5% of GDP for the first time in 14 years, majorly driven by record-high remittances of $39bn, said S&P. S&P expects Pakistan’s CPI to stabilise at 6.5% in the next 2-3 years, vs. its record peak of 29% in 2023. S&P also foresees general government deficit to drop down to 5.1% of GDP in FY2026 vs. 7.9% in FY2022.
Pakistan’s 7.375% 2031s have jumped higher by 1.45 points, currently trading at 92.66 and yielding 9.05%.
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