Islamabad : The global rating agency Moody’s has upgraded the Pakistani banking outlook from stable to positive.
It reflects the banking sectors resilient financial performance and improving macroeconomic conditions from the extremely weak levels observed a year ago.
Moody’s indicated that the positive outlook for the banking sector reflects the Government of Pakistan’s (Caa2 positive) positive outlook as well. They noted that Pakistani banks have significant exposure to the sovereign, with large holdings of government securities making up about half of total banking assets.
However, they highlighted that Pakistan’s long-term debt sustainability remains a critical risk due to its persistently weak fiscal position and high liquidity and external vulnerability risks.
“Banks will maintain adequate capital buffers, supported by subdued loan growth and solid cash generation, despite dividend payouts remaining high.”
Moody’s emphasized that the outlook was upgraded from stable to positive due to an improved operating environment.
