Fitch affirms Pakistan’s rating stable at ‘B-’, saying the country has made progress on fiscal consolidation and macroeconomic stability. At the same time, the agency warned that Pakistan remains highly exposed to global energy price shocks, particularly given its dependence on Gulf oil supplies.
In its statement, Fitch said Pakistan’s policy progress has broadly stayed in line with its International Monetary Fund programme. It added that stronger foreign exchange buffers built over the past year now offer some protection against the economic fallout from the war in the Middle East. The agency also said Pakistan’s role as a ceasefire broker could bring tangible benefits and help partly offset external pressures.
Fitch said Pakistan reached a staff-level agreement with the IMF in March on its loan programmes, unlocking a combined $1.2 billion. According to the agency, the programme remains a key policy anchor and should help attract more multilateral and bilateral support.
This support is especially important as Pakistan faces mounting external financing pressures. Fitch expects external debt amortisations to rise to $12.8 billion in FY26, up from nearly $8 billion in FY25. The agency noted that Pakistan repaid a $3.5 billion deposit to the United Arab Emirates in April. However, its projections do not include another $9.2 billion in bilateral deposits and loans that it expects lenders to roll over.
Fitch highlighted Pakistan’s heavy reliance on imported fuel as a major vulnerability. It said the country sources up to 90% of its oil from the Gulf and has limited storage capacity, making it highly exposed to conflict in the Middle East and disruptions through the Strait of Hormuz.
The agency added that fuel subsidies introduced since early March had been financed through spending reallocations. It said the fiscal impact should remain contained because the government is likely to cut expenditure elsewhere and has already reduced costs through pump-price increases and a more targeted support scheme from April.
Fitch expects higher global energy prices to push inflation up in the coming months. It forecast average inflation of 7.9% in FY26, above FY25 levels but still far below the 23.4% recorded in FY24.
The rating agency also noted that the State Bank of Pakistan cut the policy rate to 10.5% by the end of 2025 from 22.0% at the end of May 2024. Still, market rates have recently come under pressure because of inflation concerns linked to tighter energy supply.
Even so, Fitch said it still expects GDP growth of 3.1% in FY26, slightly above 3.0% in FY25, supported by better confidence and lower borrowing costs. It added that Pakistan plans to issue a panda bond this fiscal year, with financing expected to come mainly from the IMF, multilateral, bilateral and then commercial sources.
