Pakistan has weathered the economic fallout from the temporary closure of the Strait of Hormuz far better than it handled the global oil price surge in 2022, reflecting the country’s stronger economic position after two years of reforms, according to a senior analyst at Moody’s Ratings.
Speaking to a state-run digital media platform, Moody’s Assistant Vice President Christian de Guzman Lim said Pakistan’s improved macroeconomic fundamentals had enabled it to absorb external shocks more effectively, rather than relying on favourable circumstances.
She noted that the country had entered the latest Middle East crisis with lower inflation, a more stable exchange rate and higher foreign exchange reserves, providing policymakers with greater room to respond to external pressures.
“These buffers have strengthened Pakistan’s ability to withstand economic shocks compared with the situation in 2022, when soaring oil prices placed significant strain on the economy,” Lim said.
Moody’s last week upgraded Pakistan’s sovereign credit rating, citing progress in key areas of economic management. Lim said the decision was based on three broad improvements: stronger governance, a healthier external position and better fiscal performance.
She said the agency expects recent governance reforms to help the government preserve the gains made in stabilising public finances and strengthening the country’s external accounts.
Despite the upgrade, Lim cautioned that Pakistan’s credit profile remains vulnerable. She pointed out that the country continues to face structural challenges, including a narrow export base, limited foreign direct investment and a fragile external position.
Although the burden of debt servicing has begun to ease, she said interest payments still consume a large share of government revenues, leaving debt affordability weaker than that of many peer economies.
Looking ahead, Lim said any further improvement in Pakistan’s credit rating would depend on sustained policy implementation rather than short-term economic indicators. She highlighted the need for continued growth in foreign exchange reserves, stronger access to both official and commercial financing, and deeper fiscal reforms that improve the government’s debt profile.
She added that recent tax and revenue reforms, which have increased revenue collection as a share of GDP over the past two years, had already been reflected in the latest upgrade. However, she stressed that further progress on reforms would be essential if Pakistan is to secure another ratings upgrade in the future.