Moody’s Investors Service (Moody’s) has upgraded the outlook for Pakistan’s banking sector from Caa3 negative to stable
The report highlights the banks’ resilient profitability and consistent funding and liquidity, offering a sufficient cushion against the nation’s macroeconomic and political uncertainties.
With economic and fiscal strains easing, Moody’s anticipates Pakistan’s economy to rebound modestly by 2% in 2024 after a subdued performance in 2023. Additionally, it foresees a decrease in inflation from 29% to around 23% this year.
Despite these improvements, Pakistani banks’ heavy reliance on government securities, constituting approximately half of their total assets, means their creditworthiness remains closely tied to the sovereign’s. Furthermore, ongoing external pressures and a challenging operating environment will marginally impact the performance of Pakistani banks’ loan portfolios.
