KARACHI: International credit rating agency Moody’s has revised the outlook for Pakistan’s banking sector from positive to stable.
The agency has noted a gradual improvement in Pakistan’s macroeconomic conditions, particularly in the banking sector, while maintaining that key structural and fiscal challenges persist.
In its recent assessment, Moody’s observed that Pakistan’s banking sector has remained resilient despite a difficult operating environment. The agency attributed this stability to strong profitability, driven largely by elevated interest rates and banks’ significant exposure to government securities.
Moody’s expects Pakistan’s economic growth to pick up gradually, projecting GDP growth of around 3 percent in 2025, rising to approximately 3.5 percent in 2026, supported by moderating inflation, relative exchange rate stability, and improved access to external financing.
However, the agency cautioned that fiscal risks remain high, citing weak revenue mobilisation, high public debt levels, and the government’s continued reliance on external funding. Moody’s described sovereign exposure as a key vulnerability for the banking sector, noting that a substantial portion of banks’ assets is linked to government debt.
The report also highlighted policy implementation risks, external financing pressures, and lingering inflationary concerns as factors that could weigh on the economic outlook. High borrowing costs and credit risk pressures continue to constrain private-sector lending and investment.
Overall, Moody’s stated that while Pakistan has shown signs of economic stabilisation, sustained reforms and prudent fiscal management will be critical to maintaining financial stability and supporting long-term growth.
