The inflation in Pakistan will remain at around 12 percent while the interest rate will drop to 16 percent by the Fiscal Year End (2024-25), as per a recent report by the Fitch Ratings.
“The State Bank of Pakistan cut policy rates for the first time in five years on 10 June, by 150bp to 20.5%, and we now forecast FY25 inflation at 12%, and the FYE25 policy rate at 16%,” stated a report ‘Pakistan Budget Targets Deficit Reduction, Supporting IMF Prospects’ by Fitch Ratings.
The Federal Budget 2024-25 is poised to be a cornerstone of Pakistan’s economic strategy, aimed at fortifying its agreement with the International Monetary Fund (IMF).
According to the Fitch report, maintaining economic discipline within the budget framework will be crucial for reducing the fiscal deficit, a long-standing issue for the Country.
The economic growth remains a point of concern, Fitch projects that the growth rate may fall short of the government’s target of 3 percent.
Despite this, there are signs of recovery, with economic activity picking up momentum since the February elections.
The narrowing of the current account deficit (CAD) to 0.3 percent has been a bright spot, largely driven by robust agricultural exports.
This improvement in the external balance is crucial for Pakistan as it braces for substantial foreign payments obligations.
Fitch estimates that Pakistan will require around US$ 20 billion for foreign payments in the next fiscal year.
The report also suggests that some of the Country’s debts may be rolled over in the upcoming budget.
The overall Fitch report highlights some positive trends in Pakistan’s economic performance, it also underscores the challenges ahead.
