Barclays upgrades Pakistan's sovereign debt to 'overweight' on improved oil market outlook: report

British financial institution Barclays has upgraded Pakistan’s dollar bonds to overweight after having lowered the rating the previous month, citing improved oil market prospects, it emerged on Wednesday.

The upgraded rating was shared in a report by Bloomberg, cited by the advisor to the finance minister, Khurram Schehzad in a post on X.

According to the relative rating system used by Barclays coverage analysts, the “overweight” rating means that the stock is expected to outperform the unweighted expected total return of the industry coverage universe over a 12-month investment horizon.

This is in contrast to “equal weight” — wherein the stock is expected to perform in line with this expected return — and “underweight”, in which it is expected to underperform.

“The resilience of Pakistan’s external position cannot be ignored and it underpins the more optimistic view,” the Bloomberg report cited analysts, including Avanti Save, as saying.

The report said Barclays noted that the economy continued to demonstrate stability, noting the country’s improved fiscal position, steadier external buffers, “relatively steady” foreign reserves, and a “moderate growth/inflation picture”.

It added that multilateral and bilateral financing backstops remained intact, as “the country’s geopolitical position remains critical to Central Asia and the Middle East”, calling this “a potential tailwind”.

According to Bloomberg, Barclays recommends buying the 2031, 2036 and 2051 sovereign dollar bonds as well as the 2031 bond issued by the Water and Power Development Authority (Wapda), as well as selling the five-year Pakistan credit default swap.

“While credit rating upgrades have taken longer to materialise, we think agencies will look to review and conclude positively on ratings in [the second half of] 2026,” the report quoted Barclays as saying.

The bottom line is that “Pakistan’s improving fundamentals are increasingly being recognised by investors and global capital markets”, Schehzad stated.

Fitch Ratings, one of the world’s top three agencies, in April affirmed Pakistan’s long-term foreign currency issuer default rating (IDR) at “B-” with a “stable outlook”.

Last year, international rating agency Moody’s upgraded Pakistan’s credit rating by one notch to ‘Caa1’ from ‘Caa2’ and revised its outlook to stable from positive, citing an improved external position and progress on reforms under the IMF programme. Meanwhile, S&P Global raised Pakistan’s sovereign credit rating to ‘B-’ from ‘CCC+’ and placed it on a ‘stable’ outlook.