Fitch, the global rating agency, has released a report on Pakistan’s economy, stating that the country is making progress towards restoring economic stability.
Fitch noted that progress in Pakistan’s structural reforms is crucial for its debt profile, with advancements in difficult reforms key for IMF reviews and bilateral and multilateral financing.
The report further mentioned that the State Bank’s interest rate of 12% is an indication of reduced inflation for consumers, with average inflation at 24% until June, which decreased to just over 2% in January.
Fitch stated that economic activities are improving due to stabilization and lower interest rates, with economic growth expected to remain at 3%. Remittances, agricultural exports, and a tight monetary policy have led to a $1.2 billion surplus in the current account.
The agency also highlighted that foreign exchange reserves are equivalent to three months of imports, but these reserves are still lower than the required financial need, with $22 billion in payments due in fiscal year 2025.
The report concluded that while there has been better economic progress, the primary surplus exceeded IMF targets, though tax revenue during the first half of the fiscal year was lower than the IMF target.
According to Fitch, the provinces have legislated on agricultural income tax, and the increase in foreign exchange reserves and reduction in external financing needs could lead to a positive rating in July, while delays in IMF reviews could result in a negative rating.
