Barclays raises Pakistan dollar bonds to overweight

June 25, 2026 (MLN): Barclays Bank Plc has upgraded its rating on Pakistan's sovereign dollar bonds to overweight, reversing a downgrade it had issued in May.

The bank points to a more favourable global oil market outlook as a key driver of the decision.

According to Bloomberg, Pakistan's external position has shown considerable resilience that warrants a more optimistic stance.

The bank noted the economy continues to demonstrate stability, underpinned by an improved fiscal position, steadier external buffers, relatively stable foreign reserves, and a moderate growth and inflation outlook.

Barclays further highlighted that multilateral and bilateral financing support remains in place, with Pakistan's strategic geographic positioning  bridging central Asia and the Middle East  serving as a potential tailwind for continued external financing flows.

On specific trade recommendations, the bank advised buying Pakistan's 2031, 2036, and 2051 sovereign dollar bonds, as well as the 2031 bond issued by Pakistan Water and Power Development Authority, while recommending selling the five-year Pakistan credit default swap.

Looking ahead, Barclays expressed confidence that formal credit rating upgrades  though delayed  remain on the horizon, with rating expected to conclude positively on Pakistan's sovereign ratings in the second half of 2026.

Khurram Schehzad on his X account also noted that the Barclays upgrade reaffirms a broader positive narrative forming around Pakistan.

Furthermore, citing the country's stronger external and fiscal fundamentals, its growing strategic relevance as a corridor linking the Middle East and Central Asia, and the likelihood of positive sovereign rating actions ahead.

He added that Pakistan's improving macroeconomic profile is increasingly drawing recognition from global investors and international capital markets.

Pakistan's re-emergence in international debt markets adds further weight to the bullish sentiment.

The country had remained largely shut out of global capital markets for several years amid economic stress and elevated sovereign risk premiums, before successfully returning with a sovereign Eurobond issuance earlier this year.

This drew strong investor demand and was seen as a landmark vote of confidence in the country's reform trajectory.

Since then, spreads on Pakistani Eurobonds have compressed notably, reflecting a broader repricing of sovereign risk as macroeconomic conditions stabilized and the IMF programme provided a credible policy anchor.

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