ISLAMABAD: Pakistan has absorbed the economic shock from the closure of the Strait of Hormuz more effectively than it managed the oil price crisis in 2022, a Moody’s Ratings analyst said, pointing to two years of macroeconomic stabilization rather than good fortune.
Grace Lim, an assistant vice president at Moody’s, told state media digital platform that the country’s resilience stemmed from improvements made before the latest disruption began.
“Pakistan has been more resilient, more able to absorb this shock from the Middle East conflict this time around, compared to say in 2022, where there was an oil price shock,” Lim said.
She cited lower inflation, stable exchange rates and higher foreign exchange reserves as key buffers. “That gives them the buffer, that gives them better shock absorption capacity,” she said.
The comments came days after Moody’s upgraded Pakistan’s sovereign credit rating to B3 from Caa1, citing three factors: improving governance, a stronger external position and better fiscal metrics.
“We upgraded Pakistan’s rating to reflect our expectation that the improvements in its governance will allow the government to sustain the recent strengthening of its external position and fiscal metrics,” Lim said.
She cautioned, however, that the credit profile remains fragile. The B3 rating still incorporates credit constraints and a structurally weak external position, she said, noting Pakistan’s small export base and limited foreign direct investment. Debt affordability, while improving, remains weak, with interest payments consuming a large share of government revenue.
Asked what could prompt a further upgrade, Lim said sustained implementation of policies mattered more than any single indicator. She pointed to reserves rebuilding beyond current expectations, continued progress in securing official and commercial financing, and fiscal reforms that meaningfully improve debt affordability.
She added that revenue reforms over the past two years, which increased revenue as a share of GDP, had already been factored into the upgrade, but additional progress would be needed to move the rating again.
