Fitch report warns political turmoil could derail Pakistan’s economic recovery

The international credit rating agency Fitch has warned that Pakistan's ongoing political turmoil could derail the country's economic recovery. The latest Pakistan Country Risk Report highlights the precarious state of the economy, noting that urban protests have significantly hampered economic activities.

The report underscores the fragile political climate, pointing out that Pakistan Tehreek-e-Insaaf (PTI) founder Imran Khan is likely to remain imprisoned despite several successful legal appeals.

A possible scenario outlined by Fitch suggests that a technocratic administration might take charge if the government changes.

Also Read: IMF forecasts 3.5% growth for Pakistan in FY25, slightly below govt's target

This would enable Pakistan to continue implementing IMF-mandated reforms, which are projected to help the economy grow by 3.5% in the fiscal year 2024-25.

The report projected that the policy rate could reach 16% this fiscal year and decrease to 14% next year. The exchange rate has stabilised beyond expectations, with the dollar expected to reach Rs290 by the end of this year and Rs310 in 2025.

Additionally, the rating agency warned that another potential flood or natural disaster could pose a significant threat to the already fragile economy.