Moody's Ratings on Monday upgraded Pakistan's sovereign credit rating to B3 from Caa1, citing the country's stronger external position, better fiscal metrics and lower domestic financing costs. The global ratings agency maintained Pakistan's outlook at "stable", Bloomberg reported.

Pakistan's external vulnerabilities have eased as foreign-exchange reserves steadily increased, supported by sustained macroeconomic stabilisation, said Moody's. "Lower domestic financing costs amid monetary easing and an improved fiscal position" have driven a "material improvement" in Pakistan's debt affordability, Moody's said.

The country's strengthening credit profile is also showing "greater resilience to external shocks than in previous cycles," including the ongoing Middle East conflict, it added. The development comes as the country rebuilds its foreign-exchange reserves and pushes ahead with economic reforms after years of financial stress.

Reacting to the development, Prime Minister Shehbaz Sharif has welcomed Moody's upgrade of Pakistan's sovereign credit rating, praising the government's economic team for its efforts to improve the country's economic outlook.