Mazaj News (Web Desk) Fitch Ratings, one of the world’s three leading credit rating agencies, has reaffirmed Pakistan’s long-term foreign-currency debt rating at ‘B-’, maintaining the level it upgraded in April last year. The agency also assigned a Recovery Rating of ‘RR4’ after removing Pakistan’s ratings from Under Criteria Observation (UCO).
In a statement released from its Hong Kong regional office, Fitch said the decision reflects the implementation of its new Sovereign Rating Criteria, which came into effect in September 2025. Under this framework, recovery assumptions have been incorporated into sovereign debt ratings for the first time.
The RR4 recovery rating indicates an average expectation of recovery in the event of a default. Fitch’s six-point recovery scale ranges from RR1 (outstanding recovery) to RR6 (poor recovery), with RR4 positioned in the middle.
Fitch equalised the senior unsecured long-term debt ratings of Pakistan and 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 that recovery prospects would remain average in a default scenario, given Pakistan’s elevated government debt levels, high interest payment burden relative to revenue, and the absence of factors that would justify adjusting the debt ratings above or below the IDR.
On April 15, 2025, Fitch upgraded Pakistan’s Long-Term Foreign-Currency IDR to ‘B-’ with a stable outlook, from ‘CCC+’. Regarding environmental, social and governance (ESG) considerations, Pakistan holds an ESG Relevance Score of ‘5’ for political stability, rights, rule of law, institutional strength, regulatory quality and control of corruption—scores consistent with those assigned to other sovereigns.
Fitch noted that these ESG scores are heavily influenced by the World Bank Governance Indicators (WBGI), where Pakistan currently ranks in the 22nd percentile. The agency added that Pakistan’s bond and sukuk ratings remain sensitive to any changes in its Long-Term Foreign-Currency IDR.
Looking ahead, Fitch warned that potential downgrades could result from a failure to reduce government debt and debt-servicing pressures, renewed stress on external liquidity—such as delays in IMF programme reviews—or weaker economic policy discipline.
Conversely, upside potential for the rating could emerge from substantial reductions in public debt and debt-servicing costs, particularly through effective fiscal consolidation aligned with IMF commitments. Additional positive triggers include structural improvements in tax revenue collection, stronger access to external financing, and a sustained build-up of foreign-exchange reserves beyond Fitch’s current projections.