Moody’s upgrades Pakistan’s banking sector outlook to positive

Moody’s Investors Service has upgraded Pakistan’s banking sector outlook from stable to positive, reflecting gradual economic recovery and stronger confidence in the financial system.

The move highlights improving business conditions and supportive government reforms.

According to Moody’s, the positive outlook reflects a gradually improving operating environment for Pakistan’s banking sector. The agency emphasized that government reforms have strengthened confidence and spurred economic activity, setting the stage for more stable financial performance over the next 12 to 18 months.

While challenges remain, particularly regarding asset quality and profitability, Moody’s expects banks’ overall performance to remain steady.

Moody’s noted that roughly half of Pakistani banks’ assets are in government securities. This close link means the banking sector’s health is largely aligned with the government’s fiscal outlook. However, the agency cautioned that Pakistan’s long-term debt sustainability remains uncertain due to fiscal vulnerabilities and external risks.