Moody’s latest rating upgrade suggests Pakistan is marginally less likely to default, but the country remains seven notches below investment grade and continues to face significant economic challenges.
The assessment points to structural weaknesses including a narrow export base, limited foreign direct investment, heavy reliance on remittances and continued dependence on official and commercial borrowing to meet external financing needs.
Moody’s also highlighted concerns over weak rule of law, inadequate control of corruption and limited government effectiveness, factors that continue to weigh on investor confidence.
Although debt affordability has improved as inflation and interest rates have declined, the government’s interest payments remain high, leaving limited fiscal space for social and infrastructure spending.
The improvement in the rating largely reflects lower inflation and interest rates rather than major structural reforms. The assessment therefore indicates economic stabilisation rather than a fundamental shift towards sustainable long-term growth.
