Pakistan’s economy has become more resilient to external shocks and is now better positioned to absorb disruptions than it was during the 2022 oil crisis, according to Moody’s Sovereign Credit Analyst Grace Lim. Her assessment comes amid recent regional and global disruptions, including the disruption around the Strait of Hormuz. Lim said the country’s improved ability to withstand external pressure reflects the macroeconomic stability that has been built over the past two years, giving Pakistan stronger economic buffers compared with earlier periods of heightened vulnerability.
In a video shared by Khurram Schehzad on X, Grace Lim highlighted the changes in Pakistan’s economic position and identified three key factors supporting the country’s improved resilience. These include lower inflation, a stable exchange rate and significantly higher foreign exchange reserves. According to Lim, the combined improvement in these areas has strengthened Pakistan’s capacity to absorb external shocks and respond to periods of increased pressure in international markets.
Lower inflation has contributed to the improvement in Pakistan’s overall macroeconomic conditions, while exchange rate stability has provided another layer of support against external volatility. At the same time, higher foreign exchange reserves have increased the country’s financial buffers. Lim pointed to these developments as important factors behind Pakistan’s stronger position, suggesting that the economy now has greater capacity to manage disruptions that could previously have created more significant pressure on financial and external accounts.
The assessment compares Pakistan’s current position with the conditions experienced during the 2022 oil crisis, when global energy and commodity market pressures placed significant strain on economies around the world. Lim said Pakistan is now more capable of absorbing similar external shocks. The improvement in economic buffers means that disruptions affecting global markets may be handled more effectively, with the country entering periods of uncertainty from a stronger macroeconomic position than it had in previous episodes of external stress.
The importance of these buffers becomes particularly clear during periods of heightened global instability. Lim noted that the recent disruption involving the Strait of Hormuz has highlighted the importance of economic stability for countries exposed to international energy and trade developments. For Pakistan, stronger foreign exchange reserves, a stable exchange rate and lower inflation provide greater room to respond to external pressures and help limit the impact of disruptions originating outside the country.
Pakistan’s improved resilience also comes as regional developments continue to create uncertainty for economies across the region. Lim said the country’s strengthened macroeconomic position places it on firmer footing to withstand shocks linked to the ongoing Middle East conflict and related disruptions to the Strait of Hormuz. These developments can influence international energy markets, trade flows and financial conditions, making domestic economic buffers an important factor in determining how effectively a country can manage external volatility.
The comments from Moody’s indicate that the economic adjustments and improved macroeconomic conditions of the past two years have changed Pakistan’s ability to deal with external risks. While global and regional disruptions can still create challenges for the economy, the combination of lower inflation, exchange rate stability and stronger foreign exchange reserves has provided additional protection against sudden external pressures. These factors are particularly relevant for Pakistan given its exposure to movements in global commodity markets and international financial conditions.
Grace Lim’s assessment therefore places Pakistan in a comparatively stronger position than during the 2022 oil crisis, with improved economic buffers providing greater capacity to absorb external shocks. The recent Strait of Hormuz disruption and wider regional instability have once again demonstrated the importance of these buffers. According to Moody’s assessment, the progress made in macroeconomic stability over the past two years has strengthened Pakistan’s ability to manage external disruptions and maintain greater economic stability during periods of heightened global uncertainty.
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