International credit rating agency Moody’s has revised Pakistan’s banking sector outlook from positive to stable, citing gradual improvement in economic conditions but ongoing challenges for financial institutions.
According to Moody’s outlook report, Pakistan’s economic recovery is progressing slowly, and the performance of banks is expected to remain stable over the next 12 to 18 months. The report highlighted that high interest rates and credit risk pressures continue to weigh on the sector.
Moody’s identified government fiscal constraints as a major challenge for the banking industry. The report noted that although there are signs of overall economic improvement, risks faced by banks have not been completely eliminated.
The agency projected Pakistan’s GDP growth at 3.5 percent for 2026. However, it warned that concerns related to external financing and inflation persist, and risks associated with policy implementation could impact the banking sector’s outlook.
Moody’s analysis underscores the delicate balance for Pakistan’s financial sector amid ongoing macroeconomic reforms and the need for careful policy execution to sustain banking stability.
