Farooq Awan

Pakistan’s reform-driven recovery has gained significant international recognition following successful IMF reviews and global rating upgrades by Fitch, S&P, and Moody’s, underscoring renewed confidence in the country’s macroeconomic management.

According to the Finance Division’s Monthly Economic Update & Outlook (October 2025), the completion of IMF reviews under both the Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF) demonstrates the government’s strong policy performance and commitment to structural reform.

The report said that Pakistan’s sovereign risk has declined sharply, with credit default swap (CDS) spread narrowing by 2,200 basis points in the past 15 months. This improvement reflects a combination of prudent fiscal management, external sector stability, and monetary discipline that has anchored investor confidence.

In parallel, Fitch Ratings awarded Pakistan’s Sustainable Financing Framework an “Excellent” alignment score, indicating full alignment with international environmental, social, and governance (ESG) standards for green and social bonds. “This certification positions Pakistan favorably for sustainable finance inflows,” the Finance Division noted.

The report said that these developments are part of a broader trend of improved macroeconomic indicators. The rupee has stabilized against the dollar, foreign exchange reserves have risen to $19.9 billion, and inflation remains within the 5-6 percent range despite flood-related supply shocks.

“The successful IMF review reaffirmed confidence in Pakistan’s reform trajectory and prudent macroeconomic management,” the report emphasized. “It also underpins ongoing discussions for future program engagement to ensure fiscal sustainability.”

Economists said that improved ratings and IMF endorsement reduce borrowing costs and enhance Pakistan’s access to global capital markets. “When credibility improves, debt rollover becomes easier, and foreign direct investment finds a safer entry point,” one Karachi-based economist explained.

The Finance Division added that the IMF’s assessment acknowledged the government’s achievements in broadening the tax base, improving expenditure efficiency, and strengthening monetary coordination. These measures have led to a fiscal surplus of Rs1.5 trillion in July-August FY2026, compared to a deficit in the same period last year.

Officials noted that the next reform phase will focus on enhancing competitiveness, diversifying exports, and expanding renewable energy and digital sectors. “The government remains committed to translating macroeconomic stability into sustainable and inclusive growth,” the report said.

The Finance Division concluded that maintaining policy continuity is essential to consolidate recent gains. “The IMF’s positive review and international ratings upgrades are a testament to Pakistan’s reform momentum and resilience in the face of global uncertainty,” it added.

Credit: INP-WealthPk