Fitch Ratings has reaffirmed Pakistan’s sovereign credit rating at ‘B’, maintaining a stable outlook while recognizing signs of enhanced financial discipline and macroeconomic stability. The rating agency attributed this decision to improved fiscal management and gradual economic stabilization, bolstered by ongoing reforms under the International Monetary Fund (IMF) programme.
In a significant development, Fitch highlighted Pakistan’s anticipated receipt of a $1.2 billion tranche from the IMF, which is expected to strengthen the country’s foreign exchange reserves and alleviate external financing pressures. This financial inflow is also projected to ease the burden of external debt repayments.
However, Fitch cautioned that Pakistan remains exposed to energy-related risks stemming from the Middle East, which could potentially affect its economic stability. On the macroeconomic front, the agency forecasted inflation to average 7.9 percent in the fiscal year 2026, with interest rates hovering around 10.5 percent. GDP growth is expected to reach 3.1 percent, driven by improving business confidence.
Despite these encouraging indicators, several challenges persist. Fitch estimates that external debt repayments may rise to $12.8 billion, while the fiscal deficit is projected to stay near 5.3 percent of GDP. Additionally, the current account deficit is expected to widen to approximately 1.1 percent of GDP.
Overall, Fitch emphasized that Pakistan’s continued commitment to IMF-backed reforms will be crucial for maintaining economic stability and enhancing its credit profile.
Meanwhile, Fitch also downgraded Bahrain’s long-term foreign-currency issuer default rating from “B+” to “B,” citing concerns over high public debt, large fiscal deficits, and low foreign exchange reserves. The downgrade reflects expectations that Bahrain’s government debt-to-GDP ratio will continue to rise despite fiscal consolidation efforts.
Notably, Bahrain’s heavy dependence on hydrocarbon revenues, coupled with lower oil income, increased interest costs, and substantial public sector wage hikes, have contributed to a growing fiscal deficit in recent years. In response, Bahrain introduced fiscal reforms late last year, including higher fuel prices and tariffs on electricity and water, aiming to strengthen public finances. Fitch maintained Bahrain’s outlook at stable.
