Fitch Business Monitor International has raised concerns about the impact of Pakistan’s political turmoil on the country’s economic recovery. The current political instability could disrupt economic activities and hinder economic growth.
The latest Pakistan Country Risk Report highlights the critical state of Pakistan’s economic recovery, noting that urban protests have hampered economic activities. The report emphasizes that the political climate remains precarious, with the founder of Pakistan Tehreek-e-Insaaf (PTI) likely to remain imprisoned despite several successful legal appeals.
This scenario points to a continued coalition government holding power for the next 18 months, with no immediate plans for fresh elections. Fitch also outlined a possible scenario where a technocratic administration might take charge if the government changes. This implies that Pakistan’s government will continue to implement IMF-mandated reforms, helping the economy to grow by 3.2% in 2024/25.
The report projected that the policy rate could reach 16% this fiscal year and 14% next year, while the exchange rate has stabilized beyond expectations. The dollar is expected to reach 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% to 6.7%.
Additionally, Fitch warned that another potential flood or natural disaster could pose a significant threat to the already fragile economy. The report highlights the need for political stability to ensure economic growth and stability in Pakistan.
