Moody’s Revises Pakistan Banking Sector Outlook to Stable
Islamabad : International credit rating agency Moody’s has revised Pakistan’s banking sector outlook from positive to stable, citing gradual improvement in economic conditions despite a slow pace of recovery.
In its latest outlook report, Moody’s said banks’ performance is expected to remain stable over the next 12 to 18 months. The agency noted that high interest rates and continued credit risk pressures remain key challenges for the banking sector, while government fiscal constraints pose a significant risk.
Moody’s projected Pakistan’s gross domestic product (GDP) growth at 3.5 percent in 2026 but cautioned that concerns related to external financing needs and inflation persist. The agency also warned that risks associated with policy implementation could affect the sector’s outlook.
Earlier, Moody’s Ratings upgraded the local and foreign-currency long-term deposit ratings of five Pakistani banks Allied Bank Limited (ABL), Habib Bank Limited (HBL), MCB Bank, National Bank of Pakistan (NBP), and United Bank Limited (UBL) to Caa1 from Caa2.
In a statement, the rating agency said it also upgraded the baseline credit assessments and adjusted BCAs of ABL, HBL, MCB, and UBL to Caa1 from Caa2, while NBP’s assessments were raised to Caa2 from Caa3. The outlook on the long-term deposit ratings of all banks was revised to stable from positive.
Moody’s said the rating actions followed its recent decision to upgrade the Government of Pakistan’s local and foreign-currency issuer and senior unsecured debt ratings to Caa1 from Caa2, reflecting improvements in Pakistan’s external position and progress in reforms under the International Monetary Fund’s Extended Fund Facility.
The agency added that the upgrade of Pakistani banks reflects an improving operating environment, the government’s enhanced capacity to support banks if required, and the sector’s resilient financial performance. Moody’s also raised Pakistan’s Macro Profile score to “very weak+” from “very weak.”
However, the report cautioned that Pakistan’s external position remains fragile, with foreign exchange reserves still insufficient to meet external debt obligations. Moody’s stressed that continued progress under the IMF programme remains critical to unlocking external financing.
tags: #PakistanBanking #Moodys #EconomicOutlook #BankingSector #GDPGrowth #FiscalChallenges #diplomatsWorld
