Fitch Solutions has estimated the State Bank of Pakistan’s policy rate to fall to 16 percent this fiscal year, followed by a decrease to 14 percent next year.
Additionally, it predicts the PKR/$ rate to reach Rs. 290 by the end of the year and Rs. 310 by 2025.
The credit rating agency’s latest Pakistan Country Risk Report highlights the economy’s precarious state, noting that Pakistan’s ongoing political unrest could jeopardize its economic recovery.
The report mentioned that urban protests have significantly hampered economic activities. It said the political climate was fragile, further anticipating former Prime Minister Imran Khan to remain in jail despite several successful legal appeals.
The agency sees the federal government to continue implementing IMF-mandated reforms, which are projected to help the economy grow by 3.5 percent in the fiscal year 2024-25.
The rating agency warned that another potential flood or natural disaster could significantly threaten the already fragile economy. The report indicates that a continued coalition government will likely hold power for the next 18 months, with no immediate plans for fresh elections.
External Debt Burden will remain large
Pakistan is heavily dependent on imports and has a long history of wide current account deficits. The country has built up significant external liabilities. This includes both official debt issued by the state and private debt owed by non-financial corporations. With the exception of the central bank’s (limited) reserves, the economy has few FX assets.
The depreciation of the Pakistani rupee in 2022 and 2023 has raised questions about the sustainability of Pakistan’s external debt. The country succeeded in rolling over significant debt payments in mid-2023, but this has not addressed the underlying problem.
“While we forecast that Pakistani policymakers – and their international partners – will succeed in avoiding an acute debt crisis, we think that the country’s debt levels will remain elevated over the duration of our forecast period,” the firm stated.
Current Account Will Remain in Deficit
Pakistan will remain dependent on imports to meet a large share of its domestic energy and consumer goods needs. While remittances from the country’s large diaspora will help to cover these imports, Fitch expects that the current account will remain in deficit over the duration of our forecast period.
“We forecast that the deficit will average 1.1% of GDP between 2024/25 and 2026/27. FDI inflows will not be sufficient to cover this shortfall, which will leave the country dependent on portfolio inflows and foreign borrowing,” the agency added.
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Rupee is stable, dharna khan is locked and Pakistan is saved from bankruptcy. Long live Pakistan, well done chachu and hafiz sb
baray phuddu dekhe lekin aap ki kya ee baat ha
Prove it . Waiting
So after all the taxation
After record inflation
After all that
After taking away people wealth generated over decades
After taxing even people savings
Dollar so won’t stabilize. What a great country 😆 🤣 😂 😹 😆
Interesting assessment by Fitch. I find it strange that policy rates is expected to decline when inflation continues to reflect an increasing trend. It seems more focus should be on containing inflation rather than satisfying the business community to reduce their debt costs in the short term. Most economists I discuss with agree with the strategy to contain inflation by increasing policy rates to offset any risks of chaos resulting from increasing inflationary trends coupled with increasing level of direct and indirect taxes that could decimate most of the non business population in the country. Focus on job creation through FDI and related incentives. Good luck!
If we really interested in economic stability, control your import. Delete some items from your import list such as mobile phones, halt impirtof big cars for three four years, stop building roads , railways from borrowed money. Bring down interest rate. Stop all development activities for three four years and payback already accumulated loans.