The story of Pakistan’s economy has been following a familiar pattern for years: one crisis after another; crises approach and are resolved after some economic adjustments. Some of the major crises are the fall of foreign exchange reserves, the rise of inflation, the depreciation of the rupee, and the country asking for foreign investors or lenders to help with economic stability until the next crisis.

Though somewhat, it is now going to change.

But recently, in August 2026, Moody’s has upgraded Pakistan’s sovereign credit rating from Caa1 to B3 and expects the country’s credit rating outlook to be stable. Not only that, but the agency drew attention to governance improvements, robust economic conditions, and a drop in Pakistan’s external liabilities. Moreover, Moody’s said Pakistan’s economic condition is far better than in 2022 to withstand external fiscal or economic shocks based on two years of macroeconomic stabilization and current governance actions.

The word “resilience” sounds encouraging, but it needs to be understood carefully. Pakistan has not suddenly become an economically secure country. Moody’s assessment is better understood as evidence that the country has built a larger buffer between itself and the kind of crisis that nearly overwhelmed it four years ago.

What Moody’s Resilience Assessment Means 

An economic shock is an event that occurs randomly and turns up the heat on a country’s finances, e.g., oil prices start to rise, exports decline, and foreign investments or trade disappear due to local conflict.

These economic shocks are very dangerous for Pakistan because they require foreign currency to pay for imported items, such as fuel and machinery, while also servicing external debt.

This is where foreign exchange reserves matter. Reserves are essentially the country’s emergency pool of foreign currency. When reserves are too low, a country can struggle to pay its external bills, defend confidence in its currency, or meet debt payments.

Pakistan’s position has improved considerably. The State Bank of Pakistan reported total liquid foreign exchange reserves of about $23.7 billion on September 4, 2026, including more than........

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