According to BMI, a Fitch Solutions company, Pakistan’s current economic and political situation is fragile and faces several challenges. Here are some key points from their forecast:
Imran Khan’s Imprisonment: Despite successful legal appeals, Imran Khan is unlikely to be released from prison anytime soon. This could lead to continued political instability and protests from his supporters.
Government Instability: The current government may last only 18 months due to economic uncertainties and political instability. This could lead to a technocratic administration taking over rather than fresh elections.
Economic Growth: Pakistan’s economy will grow at a rate of 2.4% in 2023-24 and 3.2% in 2024-25, driven by monetary easing, improved agricultural output, and slowing inflation. However, this growth is fragile and vulnerable to external shocks.
Current Account Deficit: The current account deficit will remain small but increase from 0.8% of GDP in 2023-24 to 1.0% of GDP in 2024-25. This could lead to pressure on the Pakistani rupee and inflation.
Inflation: Inflation will slow down, allowing the State Bank of Pakistan to reduce its key policy rate from 22% to 16% in 2024 and further to 14% by the end of 2025. However, this forecast is subject to risks, including faster-than-expected inflation.
Political Risks: The government’s survival depends on its ability to push through IMF-mandated fiscal reforms. If the government is replaced, a technocratic administration is likely to take over rather than fresh elections.
External Shocks: Pakistan’s economy is vulnerable to external shocks, including floods, droughts, and political instability, which could derail the recovery.
Protests: Another round of protests in urban areas could disrupt economic activity, and the strong electoral performance of independent candidates was backed by jailed PTI leader Imran Khan.
Overall, Pakistan’s economic and political outlook is uncertain and vulnerable to several risks. The government and policymakers must navigate these challenges carefully to ensure stability and growth.
