ISLAMABAD (Dunya News) - Fitch Ratings has reaffirmed Pakistan’s long-term debt ratings at ‘B-’, maintaining the level it upgraded to in April last year, and assigned a Recovery Rating of ‘RR4’ after removing the country’s ratings from Under Criteria Observation (UCO).
In a statement issued from its Hong Kong office, Fitch said the latest rating action reflects the implementation of its revised Sovereign Rating Criteria, which came into effect in September 2025. The agency has also, for the first time, incorporated recovery assumptions directly into sovereign debt ratings.
The RR4 recovery rating indicates an average recovery expectation in the event of a default. Fitch’s recovery scale ranges from RR1 (outstanding) to RR6 (poor).
Fitch equalised Pakistan’s senior unsecured long-term debt ratings, as well as those of The Pakistan Global Sukuk Programme Company Ltd, with the country’s Long-Term Foreign-Currency Issuer Default Rating (IDR). This reflects the agency’s view of average recovery prospects, given Pakistan’s high government debt levels, substantial interest payment burden relative to revenue, and the absence of specific factors that would warrant an adjustment above or below the IDR.
The agency recalled that on April 15, 2025, it upgraded Pakistan’s Long-Term Foreign-Currency IDR to ‘B-’ with a stable outlook, from ‘CCC+’.
In terms of environmental, social, and governance (ESG) considerations, Pakistan has an ESG Relevance Score of ‘5’ for political stability, rights, rule of law, institutional strength, regulatory quality, and control of corruption—scores that apply to all sovereigns due to the heavy weighting of World Bank Governance Indicators (WBGI) in Fitch’s model. Pakistan currently ranks at the 22nd percentile on the WBGI scale.
Fitch noted that Pakistan’s bond and sukuk ratings remain sensitive to changes in its foreign-currency IDR. Potential downgrade triggers include failure to place government debt and debt-servicing costs on a sustained downward trajectory, renewed pressure on external liquidity, delays in IMF programme reviews, or weaker-than-required economic policy measures.
Conversely, factors that could lead to an upgrade include a significant reduction in government debt and debt-servicing burdens, successful fiscal consolidation in line with IMF commitments, structural improvements in tax revenue mobilisation, and a marked easing of external financing risks—particularly through stronger access to external funding and a sustained build-up of foreign exchange reserves beyond Fitch’s projections.