Pakistan’s Stronger Economy Earns S&P Credit Upgrade

On 24 July 2025, S&P Global delivered a verdict that has the potential to reshape investor sentiment: Pakistan’s sovereign credit rating has been upgraded.
For a nation emerging from years of economic volatility, this upgrade marks more than a technical improvement; it’s a turning point in the country’s global credibility.

As reported by Reuters, S&P Global upgraded Pakistan’s sovereign credit rating from ‘CCC+’ to ‘B-’ with a stable outlook. The move reflects Pakistan’s “continued economic recovery and government efforts to enhance revenue,” backed by an IMF-supported programme and a growing track record of external debt management.

The signal reached markets immediately. Pakistan’s 2051 international bond rose by 1.6 cents on the dollar within hours. 

This follows Fitch Ratings’ April 2025 decision to upgrade Pakistan’s long-term foreign-currency issuer default rating to ‘B-’, citing improved external liquidity and reform commitments under the IMF programme.

What Drove the Upgrade: Budget, Reforms, Results

The credit upgrade wasn’t a surprise — it was earned. Just weeks prior, Pakistan unveiled a Rs 17.57 trillion ($62.2 billion) federal budget aimed at accelerating economic recovery and satisfying IMF benchmarks. As reported by Reuters, Finance Minister Muhammad Aurangzeb framed the budget as a shift towards “higher-quality, investment-driven growth” inspired by East Asia’s export-led models.

The government now targets 4.2% GDP growth for FY26, up from 2.7% in FY25 — a year that itself marked a rebound from near-zero growth in FY24. While analysts remain cautious, few dispute that macro fundamentals are stabilising.

The numbers behind the sentiment

At a high-level economic briefing with Moody’s just days before the S&P announcement, Pakistan’s finance team outlined measurable progress on core indicators:

• Foreign reserves now above $14 billion, a major recovery from the 2023 nadir
  
  
• Policy rate slashed by 1.5 percentage points, the first cut in four years, reducing domestic debt costs
  
  
• Over Rs 2 trillion in additional revenue, driven by digitised tax collection and IMF-backed structural reforms
  
  
• A Q2 current account surplus, supported by stable exports and compressed imports
  
  
• Remittances surged past $3 billion in June 2025, a double-digit year-on-year increase
  
  
• Interest payments eased, enabling fiscal space for productive spending — including a 20% rise in defence allocations
  
  
• New tax base widened to include agriculture, real estate, and retail, reversing decades of fiscal imbalances
  
  
• Privatisation and pro-market reforms were actively revived under IMF oversight

“This is an East Asia moment for Pakistan,” Finance Minister Aurangzeb said. And with interest rates nearly halved (from 22% to 11%), fiscal breathing room has returned.

Why this matters for investors

For overseas investors, particularly in real estate, credit ratings like these affect risk premiums, financing terms, and overall confidence in the investment environment. A stable outlook supports predictable returns, improved banking access, and lower volatility in local currency exposure.

And credibility matters. S&P’s signal joins earlier upgrades by Fitch and high-level engagement with Moody’s,  helping institutional investors reassess Pakistan’s position.

Our perspective

At One Homes, we’ve always believed that Pakistan’s fundamentals were stronger than its global perception. We’ve backed that belief with research, rigour, and direct involvement on the ground. This upgrade is a milestone achievement.