Islamabad: Fitch Ratings has upgraded Pakistan’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CCC+’ from ‘CCC’. Fitch typically does not assign Outlooks to sovereigns with a rating of ‘CCC+’ or below.

The upgrade reflects greater certainty over the continued availability of external funding, in the context of Pakistan’s staff-level agreement (SLA) with the IMF on a new 37-month $7 billion Extended Fund Facility (EFF).

Strong performance on the previous, more temporary IMF arrangement helped the country narrow fiscal deficits and rebuild foreign exchange (FX) reserves, and further improvements are likely.

Pakistan and the IMF reached the SLA on 12 July. Before IMF Board approval, which we assume by end-August, the government will have to obtain new funding assurances from bilateral partners, chiefly Saudi Arabia, the UAE and China, totalling about $4bn-$5bn throughout the EFF.

Economic Indicators: Fitch forecast the current account deficit (CAD) to stay relatively contained at about $4 billio
n (about 1% of GDP) in FY25, after about $700 million in FY24, given tight financing conditions and subdued domestic demand.