Pakistan making headway towards economic stability, says Fitch Ratings

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Fitch ratings said in a note Thursday that Pakistan has made significant progress in restoring economic stability and strengthening external reserves.

The agency emphasized that it would be very important to advance structural reforms for the upcoming International Monetary Fund (IMF) program reviews and multilateral and continuous financial support from bilateral borrowers.

On January 27, the State Bank of Pakistan (SBP) emphasized the recent progress in inflation in inflation over the decision to reduce the policy rate by 12 %, Fich said. In January 2025, consumer prices decreased by only 2 % year -on -year, which is less than about 24 % in the fiscal year ending June 2024 (fiscal year 24).

It writes that Rapid Disinflation reflects the first basic effects of fading with subsidy reforms and exchange rates, which is supported by a strict financial stand that provided domestic demand and external financing. Wasted needs.

Fitch added that economic activity is now taking advantage of stability and reduction in interest rates, which has absorbed the strict policy settings.

It is expected to increase the real value of 3.0 % in fiscal year 25, noting that the private sector’s credit increase has been positive in the real terms for the first time since June 2022.

The arrival of strict remittances, agricultural exports, and strict policy initiatives to Pakistan’s current account after an additional amount of about $ 1.2 billion (more than 0.5 % of GDP) in six months to six months from December 2024, in the same year 24 Helping to change the size deficit.

Fitch said that in 2023, foreign exchange market reforms facilitated this change. It expected a light width in the current account deficit in FY 25, when it upgraded Pakistan’s ranking in July 2024 to the CCC+.

Foreign exchange reserves will exceed Pakistan’s $ 7 billion IMF Extension Fund Facility (EFF) and Fitch’s earlier estimates. The gross government reserves reached more than $ 18.3 billion by the end of external payments worth about three months in June, which was about $ 15.5 billion in June.

However, the reserves are low, according to the financial support requirements, more than $ 22 billion in fiscal year is the maturity of public external debt.

This includes bilateral reserves worth about $ 13 billion, which Fitch believes will be following the IMF’s promises. In December, Saudi Arabia set more than $ 3 billion, while the United Arab Emirates extended $ 2 billion in January.

Fitch writes that the flow of the new bilateral capital is expected to be rapidly associated with commercial and reform.

He cited an example to a Saudi investor on partial sale at a copper mine for example. Pakistan and Saudi Arabia also recently agreed on a delayed oil payment facility.

Despite the existing exhibitions of major maturity and lenders, gaining considerable external financing remains a challenge. In fiscal year 25, authorities have budgeted about $ 6 billion from multi -bills, including the IMF, but Fich noted that almost Billion of Billion is re -financed by the current $ 4 billion current debt. Will provide.

The World Bank Group has recently announced a 10 -year framework of $ 20 billion, which is widely aligned with expectations, with the current project portfolio of the group, $ 17 billion and the past An annual net new debt annually is $ 1 billion in five years.

Fitch acknowledged progress on financial reforms despite some shock. The basic financial fisherman has performed better to the IMF’s goals, though the first half of the fiscal year 25 was lower than the performance of the IMF indicators.

It also notes that while all the provinces have legislated high agricultural income tax – an important structural condition of the EFF – the deadline for the implementation of January 2025 was delayed due to delay.

In July, Fitch said the positive rating process could permanently recover reserves, further ease the risks of external financing and follow financial stability according to the IMF’s promises.

However, it has warned that defaming external liquidity, such as delaying the IMF studies, can trigger negative action.