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Bond Market News
Pakistan Upgraded to B3 by Moody’s
August 25, 2026
– Ritish G
Pakistan was upgraded by a notch to B3 from Caa1 by Moody’s. The upgrade reflects improving external buffers, stronger fiscal metrics and lower domestic borrowing costs. Pakistan’s foreign exchange reserves rose to about $17bn at end-July 2026 from $14bn a year earlier. The country has also regained gradual access to market financing, including a $750mn Eurobond and a $250mn panda bond issued this year. Interest payments fell to 35% of government revenue in FY2026 from 49% in FY2025 as domestic rates declined. Moody’s expects reserves to rise to $19–20bn by FY2027 and $20–21bn in FY2028, assuming continued progress under the IMF program. The rating agency also expects debt affordability to remain around 35% over the next one to two years. However, Pakistan remains exposed to high external financing needs and a narrow revenue base.
Its 7.375% 2031s were up by 0.35 points at 99.8, yielding 7.4%.
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