Fitch Business Monitor International has expressed concerns that Pakistan’s ongoing political turmoil could jeopardize the country’s economic stability.
In its latest Pakistan Country Risk Report, Fitch underscored the fragile state of Pakistan’s economic recovery, noting that urban protests have disrupted economic activities.
The report stresses that the political situation remains unstable, with the founder of Pakistan Tehreek-e-Insaaf (PTI) likely to stay imprisoned despite several successful legal appeals.
This scenario suggests a coalition government will remain in power for the next 18 months, with no immediate plans for new elections.
Fitch also presented a potential scenario where a technocratic administration might take control if the government changes. This would imply that Pakistan’s government will continue to implement IMF-mandated reforms, potentially driving economic growth to 3.2% in 2024/25.
The report projects the policy rate to reach 16 percent this fiscal year and 14 percent next year, while the exchange rate has stabilized beyond expectations.
The dollar is expected to hit Rs 290 by the end of this year and Rs 310 in 2025. Achieving budget targets under the IMF program is deemed challenging, although the fiscal deficit is anticipated to decrease from 7.4 percent to 6.7 percent.
Additionally, Fitch warned that another potential flood or natural disaster could pose a significant threat to the already fragile economy.
