Fitch Ratings has reaffirmed Pakistan’s long-term debt rating at ‘B-’ and assigned a Recovery Rating of ‘RR4’. The move follows the removal of the country from Under Criteria Observation. Fitch said the action reflects its revised Sovereign Rating Criteria, effective September 2025.
The RR4 recovery rating indicates an average recovery expectation in case of default, with the agency’s scale ranging from RR1 (outstanding) to RR6 (poor). Fitch also equalized Pakistan’s senior unsecured long-term debt and The Pakistan Global Sukuk Programme Company Ltd ratings with the country’s long-term foreign-currency issuer default rating.
Read more: Fitch affirms Pakistan’s long-term debt ratings at B
Fitch cited Pakistan’s high government debt, substantial interest payments relative to revenue, and absence of factors that could adjust the rating higher or lower. The agency recalled that it upgraded Pakistan’s long-term foreign-currency rating to ‘B-’ with a stable outlook on April 15, 2025, from ‘CCC+’.
The agency highlighted Pakistan’s ESG relevance score of ‘5’ for political stability, rule of law, regulatory quality, and control of corruption. Pakistan ranks in the 22nd percentile of the World Bank Governance Indicators, reflecting ongoing governance challenges. Fitch warned that debt-servicing pressures or weaker economic policies could trigger downgrades.
Read more: Pakistan eyes return to global bond market after 4 years: Bloomberg
Conversely, Fitch said fiscal consolidation, reduced debt burdens, improved tax revenue, and stronger external financing could support an upgrade. The agency emphasized that Pakistan’s bond and sukuk ratings remain sensitive to changes in its foreign-currency IDR. Strategic reforms could significantly improve recovery prospects.