Global credit rating agency Moody’s on Wednesday upgraded Pakistan’s rating by one level from Caa2 to Caa1.

According to Moody’s latest rating report, Pakistan’s economic outlook is stable.

“Moody’s Ratings (Moody’s) has today upgraded the Government of Pakistan’s local and foreign currency issuer and senior unsecured debt ratings to Caa1 from Caa2,” the rating agency said in its statement on Wednesday.

The move reflected an improvement in Pakistan’s external position.

“We have also upgraded the rating for the senior unsecured [medium-term note] programme to (P)Caa1 from (P)Caa2,” the agency said.

“The upgrade to Caa1 reflects Pakistan’s improving external position, supported by its progress in reform implementation under the [International Monetary Fund’s Extended Fund Facility (EFF) programme,” Moody’s stated.

“The Caa1 rating also incorporates the country’s weak governance and high political uncertainty,” the agency pointed out.

However, the agency said Pakistan’s fiscal position remains weak, though it is improving due to stronger tax collection and rising government revenues.

“Foreign exchange reserves are likely to continue to improve, although Pakistan will remain dependent on timely financing from official partners,” it added.