ISLAMABAD – In a significant boost to investor confidence, Fitch Ratings has upgraded Pakistan’s sovereign credit rating to ‘B-’, citing improving fiscal discipline, external account surpluses, and sharply declining inflation. The news was shared in the Finance Division’s Monthly Economic Update released on Thursday.
The government’s tighter fiscal management helped narrow the deficit during the first nine months of FY2025. Total revenue rose by 36.7% year-on-year to Rs13.37 trillion, driven by a 68% surge in non-tax income from petroleum levies, SBP profits, and dividends. A strong performance by the FBR and improved remittances contributed to a primary surplus and a \$1.9 billion current account surplus.
Inflation has also dropped significantly. Consumer prices rose just 0.3% in April, the lowest in recent memory, following a steep drop in food, energy, and transport costs. In response, the central bank cut its policy rate by 100 basis points to 11% earlier this month, signaling a shift towards a looser monetary stance.
While large-scale manufacturing (LSM) growth remains mixed, some sectors have shown recovery. The auto sector led the way, with car production up 38.3% and commercial vehicles seeing a massive boost. However, overall LSM contracted 1.5% during Jul-Mar. Cement exports surged by 29%, offsetting a 5.6% fall in local demand.
Agriculture performance improved with strong wheat sowing and rising credit disbursement to the sector, which jumped 15% to Rs1.88 trillion. Fertiliser supplies for the upcoming season are expected to exceed demand, showing the impact of better planning and policy support.
Pakistan’s external position also strengthened. Reserves reached \$16.6 billion, while private sector credit expanded to Rs751.5 billion, triple last year’s figure. Despite regional tensions hurting the KSE-100 index in April, partial recovery was seen in May. Meanwhile, poverty reduction efforts continued, and the launch of Pakistan’s first Green Sukuk showed the government’s focus on sustainable, inclusive development.