Fitch predicts continued turbulence for Pakistan's economy and politics
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Imran Khan, the founder of Pakistan Tehreek-e-Insaaf (PTI) is expected to remain in custody for the foreseeable future, while the current Pakistan Muslim League-Nawaz led coalition government is projected to stay in power for another 18 months, according to a recent report by the economic rating agency Fitch.
This prediction suggests that a government of technocrats may take over after this period.
Fitch's report on Pakistan highlights significant political and economic challenges.
The agency noted that independent candidates, supported by the jailed PTI founder, had substantial success in the general elections. Despite this, the government has set ambitious economic targets in its budget, which may be affected by ongoing demonstrations in various cities.
The report forecasts a decrease in the country's inflation rate by the end of the financial year, with expectations that the State Bank will lower the interest rate to 14%. Additionally, the government aims to reduce its fiscal deficit from 7.4 percent to 6.7 percent.
However, Fitch warned of external payment pressures and the risks posed by floods and droughts to agriculture. The report emphasized that Pakistan's current political turmoil could disrupt economic stability, with urban protests hampering economic activities.
Fitch's analysis projects that the policy rate could reach 16 percent this fiscal year and 14 percent next year. The exchange rate has stabilized better than expected, with the dollar anticipated to reach Rs 290 by the end of this year and Rs 310 in 2025. Achieving budget targets under the IMF program remains challenging, although a decrease in the fiscal deficit is anticipated.
The report also highlighted the potential threat of another natural disaster, such as a flood, which could significantly impact Pakistan's fragile economy. Fitch stressed the importance of continued collaboration between the government and the IMF on economic reforms to ensure growth and stability.