Economic Recovery Continues; Moody’s Revises Pakistan Banking Sector Outlook to Stable

Islamabad, February 9, 2026 — Global credit rating agency Moody’s has revised its outlook on Pakistan’s banking system from positive to stable.
According to Moody’s latest report, Pakistani banks’ financial performance is expected to remain stable over the next 12 to 18 months. The agency attributes this change to a gradual recovery in the operating environment, supported by the country’s slowly improving economic and fiscal outlook, as well as a strengthening external position.
The report notes that while the economy is recovering, the pace remains slow and uneven. Moody’s forecasts real GDP growth of around 3.5% in 2026. However, banks will continue to face pressures from high interest rates, elevated credit risks, and constrained sovereign fiscal position.
Moody’s has specifically identified government fiscal challenges as a major risk to the banking sector. Despite ongoing stabilization measures and improved financial conditions, the agency expects banks’ performance to stabilize rather than strengthen further in the near term.
The revision reflects balanced risks amid gradual economic progress, though vulnerabilities related to external financing, inflation, and policy implementation continue to pose challenges. This development is seen as a sign of stabilization in Pakistan’s economic journey, albeit without accelerated improvement in the banking sector.