Standard & Poor’s (S&P) Global on Tuesday upgraded Pakistan’s long-term sovereign credit rating to ‘B’ from ‘B-‘. Pakistan was last assigned a ‘B’ rating between October 31, 2016 and February 3, 2019.

S&P Global also raised Pakistan’s transfer and convertibility assessment to ‘B’ from ‘B-‘.

The upgrade reflects stronger institutional capacity, sustained implementation of reforms backed by the International Monetary Fund (IMF), improved fiscal performance and a significant rebuilding of foreign exchange reserves.

In an official release, S&P Global said it believed “Pakistan has strengthened institutional capacity, demonstrated through the implementation of critical reforms.” This, it said, “has bolstered the country’s foreign exchange reserves and alleviated pressure on external credit metrics.”

The agency also said the government’s efforts to expand its revenue base had accelerated fiscal consolidation, facilitating “a steady decline in its net general government debt-to-GDP ratio.”

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“We therefore raised our long-term sovereign rating on Pakistan to ‘B’. At the same time, we affirmed the ‘B’ short-term rating,” the update read. The stable outlook, it added, “reflects our expectations that improved institutional settings will anchor economic reforms to bring about a sustained period of steady growth and fiscal consolidation.”

The progress, it said, reflected the agency’s view of Pakistan’s improved political and institutional settings. It added that sustained official financing would help the country meet its external obligations and continue rolling over its commercial credit lines over the next 12 months.

However, the agency said it could lower its ratings if, “contrary to our expectations”, Pakistan’s external or fiscal indicators deteriorate due to a diminished commitment to fiscal consolidation. “This could erode financial support from key bilateral and multilateral partners, pressuring usable foreign exchange reserves,” it added.

Prime Minister Shehbaz Sharif on Wednesday welcomed S&P Global’s decision to upgrade Pakistan’s sovereign credit rating, describing it as a significant milestone for the country’s economy.

According to a statement from the Media Wing of the Prime Minister’s Office, PM Shehbaz stated that the upgrade reflected the international community’s confidence in the government’s effective economic policies, fiscal discipline, structural reforms, and sustained efforts to stabilise the national economy.

The premier stated that the government had taken difficult but necessary economic decisions, the positive outcomes of which were now being acknowledged internationally. He also expressed confidence that the upgrade would boost the confidence of international investors, create new investment opportunities, and further accelerate Pakistan’s economic growth.

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Further, PM Shehbaz commended Foreign Minister Ishaq Dar, Finance Minister Muhammad Aurangzeb, the government’s economic team, and all relevant institutions for their contributions to the achievement. Reaffirming the government’s commitment to economic reforms, he stated that the reform agenda would continue with determination and resolve to provide Pakistan with a strong and sustainable economic foundation.

Last year, S&P’s credit rating agency upgraded Pakistan’s standing by one notch, to ‘B-‘. This was an improvement from the country’s previous standing, though still two positions below investment grade.

The move came due to the implementation of reforms and the abating risks of sovereign default.

Meanwhile, Islamabad’s long-term sovereign credit ratings were raised from ‘CCC+’ to ‘B-‘ after a gap of two-and-a-half-years. S&P Global Ratings, one of the three largest credit rating firms, also assigned a stable outlook to Pakistan, improving its creditworthiness from “very high credit risk, vulnerable to non-payment” to “highly speculative.”