Moody’s Revises Pakistan Banking Sector Outlook to Stable Amid Gradual Economic Recovery

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 ongoing challenges.

According to Moody’s outlook report, Pakistan’s economic environment is showing signs of steady improvement; however, the pace of recovery remains slow. The agency expects the performance of banks to remain stable over the next 12 to 18 months.

The report noted that high interest rates and continued pressure from credit risks remain key concerns for the banking sector. Moody’s identified the government’s fiscal constraints as a major challenge affecting banks’ operating environment.

Moody’s stated that while there are indications of overall economic improvement, risks faced by the banking sector have not been fully eliminated. The agency has projected Pakistan’s GDP growth at 3.5 percent in 2026.

However, the report cautioned that concerns related to external financing requirements and inflation persist, adding that risks associated with policy implementation could also influence the banking sector’s outlook going forward.