WASHINGTON / ISLAMABAD — Global credit rating agency Fitch Ratings has affirmed Pakistan’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B-‘ with a Stable Outlook. The affirmation reflects the country’s steady progress on fiscal consolidation and macroeconomic stabilization, bolstered by the ongoing International Monetary Fund (IMF) program.
Key Economic Indicators for FY2026
According to the Fitch report released Monday, Pakistan’s economic trajectory shows signs of resilience despite global headwinds:
- GDP Growth: Fitch expects GDP growth to edge up to 3.1% in FY26, supported by improved investor confidence and lower borrowing costs following the State Bank’s policy rate cuts.
- Inflation Outlook: Average inflation is forecast at 7.9% for FY26. While this is an increase from the previous year due to rising energy costs, it remains significantly lower than the 23.4% peak seen in FY24.
- Debt-to-GDP: Government debt is projected to decline gradually to 68.9% of GDP by the end of FY26, down from 70.7% in FY25.
Strengthening Foreign Reserves
The agency highlighted that Pakistan has successfully rebuilt its foreign exchange buffers over the past year.
- FX Reserves: Non-gold reserves rose to $17.5 billion (as of early 2026). However, Fitch expects reserves to settle around $21.3 billion by the end of FY26 after accounting for debt repayments and current account shifts.
- New Funding Avenues: To meet external financing needs, Pakistan is exploring diverse markets, including plans to issue its first Panda Bond within the current fiscal year.
Risks: The Middle East Conflict
Fitch warned that Pakistan remains highly exposed to the ongoing Middle East crisis and potential disruptions in the Strait of Hormuz.
- Energy Security: With nearly 90% of oil sourced from the Gulf, any constriction in energy supply could trigger higher inflation and weigh on growth.
- Strategic Role: Interestingly, the agency noted that Pakistan’s role as a diplomatic broker in regional ceasefire talks may provide tangible strategic benefits, potentially offsetting some external economic pressures.
