Fitch Ratings has affirmed Pakistan’s long-term foreign-currency issuer default rating at B- and assigned a Recovery Rating of RR4, removing the country from its “Under Criteria Observation” list.
The move follows Fitch’s adoption of new sovereign rating criteria effective September 2025, which for the first time incorporate recovery assumptions into sovereign debt ratings. Under the revised methodology, the agency assesses not only the risk of default but also the likely recovery for bondholders in the event of a default.
Fitch previously upgraded Pakistan’s rating to B- from CCC+ on April 15, 2025.
The agency said the senior unsecured long-term debt ratings of Pakistan and The Pakistan Global Sukuk Program Company Limited are aligned with the country’s long-term foreign-currency rating, reflecting average recovery prospects should a default occur. According to Fitch, RR4-rated securities historically recover about 31%–50% of principal and interest.
In its assessment, Fitch cited Pakistan’s high government debt levels and heavy interest payments relative to revenue, along with governance challenges such as political stability and rule of law.
Fitch said the ratings could face downward pressure if public debt metrics deteriorate or external liquidity weakens, particularly if there are delays in International Monetary Fund (IMF) programme reviews. On the other hand, the agency noted that an upgrade could follow sustained fiscal consolidation, improved tax revenue generation, and reduced external financing risks.
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