According to Moody’s outlook report, Pakistan’s economic conditions are gradually improving; however, the pace of economic recovery remains slow. It is expected that the performance of banks will remain stable over the next 12 to 18 months.

The report states that high interest rates and pressure from credit risk continue to persist in Pakistan. Moody’s has identified the government’s fiscal challenges as a major issue for the banking sector.

According to the rating agency, although there are signs of improvement in the overall economic situation, the risks faced by banks have not been fully eliminated.

Moody’s has projected Pakistan’s GDP growth at 3.5% in 2026; however, the report clearly notes that concerns related to external financing and inflation remain, and risks linked to policy implementation may also affect the banking sector’s outlook.

Also Read: No more Rs5000 notes in Pakistan? SBP issues official statement