ISLAMABAD: Fitch Ratings, one of the world’s top three agencies, on Wednesday affirmed Pakistan’s long-term debt ratings at ‘B-’ (B-negative), which it had upgraded in April last year, and assigned a Recovery Rating of ‘RR4’ following the removal of the ratings from Under Criteria Observation (UCO).

In a statement issued from its regional office in Hong Kong, the agency said the rating actions reflect the application of Fitch’s new Sovereign Rating Criteria, effective September 2025, and the inclusion of recovery assumptions into sovereign debt ratings for the first time.

The recovery rating RR4 denotes ‘average’ recovery expectation from default in a scale of six categories, starting from RR1 for outstanding, RR2 for superior, RR3 for good and RR4 for average. This is followed by RR5 for below average and RR6 for poor.

The senior unsecured long-term debt ratings of Pakistan and The Pakistan Global Sukuk Programme Company Ltd are equalised with Pakistan’s Long-Term Foreign-Currency Issuer Default Rating (IDR), reflecting Fitch’s expectation of average recovery prospects in a default scenario, given Pakistan’s high levels of general government debt and interest payments as a percentage of revenue, and the absence of any other clearly identifiable criteria factors that would cause us to notch the debt ratings up or down from the IDR.

On April 15, 2025, Fitch upgraded Pakistan’s Long-Term Foreign-Currency IDR to ‘B-’ with a stable outlook, from ‘CCC+’. In terms of environmental, social, and governance (ESG) key rating drivers for the Long-Term Foreign-Currency IDR and, in turn, the debt ratings, Pakistan has an ESG Relevance Score of ‘5’ for political stability and rights and for the rule of law, institutional and regulatory quality and control of corruption, as is the case for all sovereigns.

These scores reflect the high weight that World Bank Governance Indicators (WBGI) have for sovereign rating model. Pakistan has a WBGI ranking at the 22nd percentile. The bond and sukuk ratings are sensitive to any changes in Pakistan’s Long-Term Foreign-Currency IDR, which could change with sensitivities.

It notes that factors that could individually or collectively lead to a negative rating for downgrade include failure to keep government debt and debt-servicing metrics on a firm downward path, renewed deterioration in external liquidity conditions, for example, from delays in IMF programme reviews or insufficiently tight economic policy settings.

On the other hand, factors that could rating upgrade include significant declines in government debt and debt-servicing burdens, for example due to the implementation of fiscal consolidation plans in line with IMF programme commitments, leading to structural improvements in tax revenue generation and further significant easing of external financing risks, including evidence of greater ability to source external funding and a sustained recovery in foreign-currency reserves beyond Fitch’s forecasts.

Published in Dawn, January 22nd, 2026