KARACHI:

Fitch Ratings has placed the long-term debt ratings of 25 sovereigns, including Pakistan, Under Criteria Observation (UCO) following an overhaul of its sovereign rating methodology.

The action, announced late Friday, covers 435 long-term sovereign debt instruments and follows the release of Fitch’s updated Sovereign Rating Criteria on September 15, 2025. Although the UCO designation does not represent an immediate change in the ratings, it signals that they may shift once Fitch completes its reassessment under the revised framework within the next six months.

The update introduces loss severity considerations into the assessment of long-term sovereign debt, meaning creditors’ recovery prospects in the event of a default will now play a direct role in determining ratings. Sovereigns with long-term issuer default ratings (IDRs) of B+ or below could see their debt ratings adjusted upward, downward, or equalised depending on expected recovery outcomes. According to Fitch, the recovery rate estimates will be linked to the assignment of Recovery Ratings, making the methodology more consistent with how corporate and structured finance credits are evaluated.

Analysts in Pakistan view the move as technical rather than immediately consequential. Waqas Ghani Kukaswadia, Research Head at JS Global, said Fitch’s criteria change was primarily about recalibrating recovery expectations. “They have made some changes to the recovery expectations and loss severity, based on which they will now issue these ratings. They have changed some rules in estimating loss severity – whether recovery prospects are below average or above average. That’s about it. It is a technical update and apparently has no immediate impact,” he explained.

Even so, the update could have meaningful implications for sovereigns already under financial strain. Fitch noted that long-term debt instruments could be notched up if recovery expectations are “above average”, better, or notched down if expectations are “below average” or worse. Those deemed “average” will be equalised with the issuer’s IDR. While the criteria technically apply across the rating scale, the most visible effects are expected among lower-rated sovereigns – typically frontier and emerging market economies grappling with weak external finances, heavy debt burdens, or limited access to global capital markets.

Countries affected by the UCO placement include Pakistan, Sri Lanka, Egypt, Nigeria, Ghana, Kenya, Ethiopia, and Ukraine, among others. Pakistan’s global sukuk programme has also been specifically flagged as under review. Fitch emphasised that the UCO action does not indicate any deterioration in these countries’ fundamental credit profiles, nor does it alter their current outlooks or rating watches. Pakistan’s sovereign rating was last affirmed at CCC+ earlier this year, reflecting a fragile external liquidity position despite ongoing reforms under the International Monetary Fund programme.

Fitch plans to complete its reassessment within six months, after which the UCO designation will be resolved. Ratings may remain unchanged, be upgraded, or downgraded depending on the final recovery assessments. Market analysts suggest that while investors may not react sharply in the short term, the eventual resolution could influence sentiment toward countries with high debt rollover needs and constrained fiscal positions.

By introducing loss severity into sovereign ratings, Fitch is bringing its approach closer to that already applied in corporate and structured finance sectors, where recovery assumptions are standard practice. Although the methodology update may not carry immediate market consequences, some countries with lower ratings could face movement, either upward or downward, once Fitch applies its new framework in practice.

Companies across consumer electronics, e-commerce, automobiles, retail, logistics, and FMCG are rushing to hire temporary staff as India’s festive season kicks off, following reduced GST rates from September 22. Industry experts say many shoppers had postponed purchases earlier this season, which dented sales, but with firms passing on GST cuts through price reductions, buyers are expected to spend more freely, prompting companies to step up hiring and marketing. Staffing agencies including Quess, Randstad, and CIEL HR report that demand is highest for frontline and fulfilment roles. This includes in-shop demonstrators, retail sales staff, warehouse pickers and packers, last-mile delivery personnel, and service technicians for appliances and electronics. Contact-centre and back-office staff are also being scaled up to handle higher order volumes. “Several sectors that already ran festive hiring drives are now extending mandates and adding last-minute temp headcount in response to the GST rate cuts and the expected post-cut sales surge,” Aditya Narayan Mishra, MD of CIEL HR told ET. “Demand is strongest in consumer durables, followed by auto and large BPO/CRM operations,” Mishra further added. Shilpa Subhaschandra, chief commercial officer, Operational Talent Solutions, Randstad India, said, “We are seeing clients, particularly in ecommerce, quick-commerce, consumer electronics, auto, retail, logistics, and FMCG extend and add last-minute mandates beyond their original plans to capture the anticipated jump in festive sales.”Subhaschandra further told ET, “On average, these additional mandates translate to a 20-25% uplift in temporary workforce requirements versus last year, with quick-commerce platforms showing the largest thrust, expanding headcount by 40-60% to handle surge volumes.” The festive season that began with Onam in August and runs through Diwali, is India’s biggest shopping period, accounting for 25–30% of annual sales for most consumer goods companies. However, early sales during Onam in Kerala and pre-Durga Puja in East India were subdued as consumers waited for the GST reduction. Industry executives expect strong sales to continue through Christmas as pent-up demand is released. Retailers and electronics chains are hiring up to 20% more temporary staff to manage the anticipated rise in demand from Navratri to Diwali. Auto companies including Mahindra & Mahindra and Maruti Suzuki are also increasing staffing requirements, according to recruitment firms. Email queries to these companies went unanswered. Leading electronics retailer Vijay Sales is expanding its temporary workforce by 10–15% this festive season, said director Nilesh Gupta. He added that demand is expected to rise for large-screen televisions and air conditioners, where GST has been reduced from 28% to 18%. Daikin India, a Japanese AC manufacturer, is boosting shopfloor promoters and increasing its marketing budget to recover from a recent sales slump, said managing director KJ Jawa. Great Eastern Retail will also hire more temporary staff in its top 20 high-footfall stores than originally planned, said Pulkit Baid, director of the East and North India-focused electronics chain. Auto companies have increased hiring by 20–25%, while e-commerce staffing is growing steadily at 15–20%, with a further surge expected over the next two weeks, said Nitin Dave, CEO of Quess Staffing Solutions told ET. “While broad salary levels have not shifted significantly, some employers are offering attendance and joining bonuses to attract talent,” he added.