Fitch Ratings updated its sovereign rating criteria on September 15, 2025. This change introduces an evaluation of loss severity in debt ratings, which assesses what creditors would receive if a country defaults on its payments. As part of this update, Fitch placed 25 countries, including Pakistan, under Criteria Observation (UCO). This indicates that their ratings may be revised soon.
UCO is not a downgrade. It indicates that Fitch will review ratings in accordance with new rules. The check will take up to six months. Ratings could go up, down, or stay the same. Pakistan’s rating is CCC+. This is low but stable for now.
The update makes sovereign ratings like corporate ones. It uses Recovery Ratings to estimate losses in defaults. Lower-rated countries like Pakistan (B+ or below) may see big changes. Fitch says this makes ratings fairer and clearer.
Read: Fitch Ratings Warns Pakistan’s External Debt Repayment Challenges in FY25
Pakistan’s sovereign rating is CCC+. It shows weak finances, but it has implemented some reforms. The IMF program helps. Fitch last checked it earlier in 2025. The UCO will look at debt recovery chances. The list includes Sri Lanka, Egypt, Nigeria, Ghana, Kenya, Ethiopia, and Ukraine. Pakistan’s global sukuk program is also under review. Fitch says no credit issues caused the UCO. It’s just the new rules.
Fitch will finish the review in six months. Ratings may stay the same. Or they could rise if recovery looks good. They might fall if not. Markets may not react much now. But the end result could affect Pakistan’s borrowing costs. Pakistan owes $26 billion in 2025-26. Rating changes can make loans cost more or less. A better rating helps get funds. This update could help lower-rated countries like Pakistan.
Fitch’s UCO for Pakistan is a routine check. New rules look at debt recovery. Ratings may change in six months. This could help Pakistan’s economy. Watch for the final update.
