Fitch Ratings Predicts Better Than Expected Growth for Pakistan’s Economy in FY2022

America’s credit rating agency, Fitch Ratings, expects Pakistan’s growth to stabilize at nearly 4 percent in the upcoming fiscal year, and the current account deficit to narrow to 0.5 percent of the GDP in FY21 from 1.7 percent in FY20.

This comes after Fitch had estimated the growth rate to be negative 0.5 percent for the current fiscal year.

A statement issued by Fitch attributes the projected economic stability to come from domestic consumption, and continued manufacturing and improvement in construction activity.


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Fitch affirmed Pakistan’s long-term foreign-currency issuer default rating at ‘B-’ with a stable outlook. It also said that this rating reflects weak public finances and external finance vulnerabilities, coupled with low governance indicator scores.

However, it explained that the Pakistani economy has been able to absorb the shocks from the pandemic better than the comparable economies.

It estimates the growth next year to be 3.9 percent and sees the economic uncertainties caused by the pandemic and political challenges to keeping the reform agenda on track as risks.

Fitch has predicted a policy rate hike of only 25 basis points from the current seven percent in FY22.

It said that the market-determined exchange-rate regime had acted as a shock absorber during the pandemic for Pakistan.


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The external debt repayments are still projected to remain high at around $8 billion to $10 billion per annum over the next few years.

“Pakistan’s March 2021 Eurobond issue of $2.5 billion had strong investor demand. China remains a key source of bilateral financing, providing about $2.3 billion in budget support in FY21, and augmenting the size of the People’s Bank of China’s currency-swap agreement with the State Bank of Pakistan by $1.5 billion, which was used to help repay $2 billion in deposits from Saudi Arabia in FY21,” Fitch said.

“Progress has recently been made in advancing economic reforms, although complicated by high inflation and economic pressures from the pandemic. Important measures in the pipeline include amendments to the SBP Act to improve central bank independence. Passage of reforms could prove challenging in the current political environment,” added the credit rating agency.

External debt repayments will remain high, at about USD8 billion-10 billion per annum over the next few years, added the report. “Participation in the G-20’s Debt Service Suspension Initiative (DSSI) has reduced near-term pressures by postponing USD3.7 billion in payments previously scheduled between May 2020 and December 2021 to over a five- to six-year period,” it added.

Fitch said that the inflationary pressures have re-emerged with the CPI reaching 11.1% YoY in April. It expects inflation to moderate to an average of 8.3% over FY22, from an average of 9.0% in FY21, as the temporary rise in food prices subsides, and the rise in oil prices moderates.