American credit rating agency Fitch shared a worrisome report about Pakistan’s current political instability that could hinder economic recovery.
In its latest Country Risk Report, Fitch Business Monitor International highlighted the critical condition of Pakistan’s economic recovery, pointing out that political turmoil will affect economic activities.
The report pointed out unstable political situation, with Pakistan Tehreek-e-Insaaf (PTI) founding chairman and former Prime Minister Imran Khan expected to remain behind bars despite legal victories.
It said the PML-N led coalition government will remain in power for next 18 months, with no immediate plans for new elections. Fitch also mentioned a potential scenario where a technocratic administration could take over if the government changes.
This implies that Pakistan will continue to implement IMF-mandated reforms, enabling the economy to grow by 3.2% in 2024/25. The report projects that the policy rate could reach 16 percent this fiscal year and 14 percent next year, while the exchange rate has stabilized beyond expectations.
USD is expected to reach Rs 290 by the end of this year and Rs 310 next year, the report said. Achieving budget targets under the IMF program is considered challenging, although the fiscal deficit is expected to decrease from 7.4 percent to 6.7 percent, it added.
Fitch also warned that another flood or natural disaster could significantly threaten the already fragile economy.
