Pakistan more resilient to external shocks than in 2022: Moody’s

Says country remains vulnerable due to a fragile external position and weak debt affordability

Pakistan is now better placed to absorb external economic shocks than it was in 2022, Moody’s Assistant Vice President Grace Lim said, attributing the improved resilience to two years of macroeconomic stabilisation and recent governance measures.

Speaking to state-run Pakistan TV Digital days after the agency upgraded the country’s sovereign credit rating, Lim attributed Pakistan’s greater resilience to two years of macroeconomic stabilisation rather than luck.

“Pakistan has been more resilient, more able to absorb this shock from the Middle East conflict this time around, compared to say in 2022, where there was an oil price shock,” she said.

Pakistan's economy more resilient to Hormuz shock than 2022 oil crisis: Moody's analyst Grace Lim | South Speaks with Saqib pic.twitter.com/clHJ5MRB23

— Pakistan TV Digital (@PakistanTVcom) September 7, 2026

She said the resilience had been built through improvements made before the latest disruption.

“Lower inflation, stable exchange rates, higher foreign exchange reserves, that gives them the buffer, that gives them better shock absorption capacity,” she added.

Lim said three factors had driven Moody’s decision to upgrade Pakistan’s rating: improving governance, a stronger external position and better fiscal metrics.

“We upgraded Pakistan’s rating to reflect our expectation that the improvements in its governance will allow the government to sustain the recent strengthening of its external position and fiscal metrics,” she said.

However, she cautioned that Pakistan’s credit profile remained vulnerable.

Read: Moody's upgrades Pakistan's rating

“Our B3 rating still incorporates credit constraints, a structurally fragile external position. It still has a small export base and limited foreign direct investment,” Lim said.

She added that debt affordability — measured by the share of government revenue absorbed by interest payments — was improving but remained weak.

Last month, Moody’s upgraded Pakistan’s sovereign credit rating from Caa1 to B3 while maintaining a stable outlook, citing improvements in governance, the country’s external position and fiscal metrics.

Asked what could lead to a further upgrade, Lim pointed to sustained implementation rather than any single indicator.

She said this would include rebuilding reserves beyond current expectations, continued improvement in access to official and commercial financing, and fiscal reforms that meaningfully improved debt affordability.

Lim said revenue reforms over the past two years, which had increased revenue as a share of gross domestic product, had already been factored into the latest upgrade. Further progress, however, would be required for another rating improvement.

Moody’s rating outlooks fall into four categories: positive, negative, stable and developing. A stable outlook indicates a low likelihood of a rating change over the medium term, while the other three categories indicate a “higher likelihood” of a rating change.

Last month, it upgraded Pakistan to B3 rating but said that international surveys continue to point to weak rule of law and control of corruption and limited government effectiveness.

In its rating upgrade, the agency also said that the nation’s debt profit remained weak due to a “fragile” external position and constraints on growth and investment.