Global credit rating agencies have upgraded Pakistan’s outlook at a time when the country has executed its largest-ever early debt retirement, repaying more than PKR 2.6 trillion in less than a year. Moody’s raised Pakistan’s sovereign rating from Caa2 to Caa1 with a stable outlook, while Fitch Ratings and Standard & Poor’s (S&P) both revised the country’s standing from CCC+ to B- with a stable outlook. Finance Minister Senator Muhammad Aurangzeb welcomed the moves, describing them as renewed international confidence in Pakistan’s reform-driven economic turnaround.

The Ministry of Finance has confirmed that Pakistan’s debt retirement marks a historic first in the country’s fiscal history. Between June 30 and August 29, 2025, the government repaid PKR 1.633 trillion of debt owed to the State Bank of Pakistan, cutting nearly 30 percent of the central bank’s exposure within just 59 days and reducing liabilities from PKR 5.5 trillion to PKR 3.8 trillion, years ahead of the 2029 maturity. Earlier in the fiscal year, the government also retired PKR 1.0 trillion in domestic commercial market debt well before schedule. Taken together, the total early repayments now exceed PKR 2.6 trillion.

Officials explained that the move has strengthened fiscal resilience by extending the average maturity of domestic debt from 2.7 years in FY24 to 3.8 years in FY25, the sharpest single-year improvement on record and well above IMF targets. Early repayment has also reduced refinancing risks, eased the 2029 repayment burden, and created fiscal space for development spending. In addition, falling rates combined with disciplined repayment operations have already generated over PKR 800 billion in taxpayer savings during the current fiscal year.

Observers note that the combination of early debt retirement and international credit upgrades signals a decisive shift in Pakistan’s financial management approach. Where past governments relied heavily on borrowing, the current policy places repayment and responsibility at the center of fiscal governance. According to the Finance Minister, this transformation is not only restoring credibility with international lenders but also building a more resilient and sustainable economic foundation for the country.