US tariffs represent risk to Pakistan’s medium-term outlook: State Bank

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KARACHI: Pakistan’s Central Bank on Monday warned of the threats of the country’s mid -term economic outlook on Monday due to uncertainty caused by US President Donald Trump’s prices and uncertainty caused by the uncertainty of the commodity prices.

Since the State Bank of Fi -25, the first half of the current financial year has improved the economic situation, when inflation has declined sharply, the current account balance has turned into a surplus, and the fiscal deficit has been reached the lowest level after the financial year after the financial year.

The SBP said that favorable results were mainly supported by the approval of the Calrent Monetary Policy, financial stability, stable global commodity prices, and the IMF’s Extension Fund Facility (EFF) program.

Recently, Fitch ratings upgraded Pakistan’s ranking from ‘B-CC+’. Islamabad expects $ 2.3 billion to be provided in two separate loans from the IMF: About $ 1 billion as the second installment of a $ 7 billion bailout last year and $ 1.3 billion pending under flexibility and stability. Pakistan and the IMF reached the first EFF review and a new management, RSF staff level agreement last month.

In addition to US prices, the SBP report states that the changing geographical political situation, adjustment in energy prices, the response to the overall demand for various financial measures, and the spread of international currency to local currency are a threat to the country’s economy.

Although Trump has temporarily halted the heavy rates on almost all trade partners, the 10 % blanket duty is intact, which is 145 % tariff on China’s largest trade partner China.

The report states that “the economic ideological approach is permanent on how the global economic and political environment is formed.”

“In this context, there are three significant risks. In the past, the recent change towards maximum protectionist trade policies has already begun to be implemented,” he said. Increasing revenue can disrupt trade and economic activity, which has the implications of EMDES. [emerging market and developing economies] Exports and remittances and international commodities, “he added.

“Second, the global economy, in general, and the ongoing geographical political dispute for commodity prices, especially the third – the third, and the potential obstacles to the supply chain and their implications for global financial conditions are about to improve inflation, which is about to restore global inflation.”

The report states that the real GDP growth for the financial year 25 will be from 2.5 % to 3.5 %. During meetings with global financial and investment agencies at the IMF World Bank Spring meetings in Washington last week, SBP Governor Jamil Ahmed said that the country’s economy is slowly recovering and it is expected to increase by 3.0 percent in this financial year.

Last week, the IMF reviewed Pakistan’s development forecast for the current fiscal year, reducing it from 3.0 percent to 2.6 percent. The IMF has also reduced its global development predictions during Trump’s trade tax measures.

The central bank said, due to a major disinfection trend and recent changes in food and energy prices – domestic and internationally – the average inflation projection for fiscal year 25 is set at 5.5 % at 7.5 %. With workers remittances, low commodity prices and expected growth for ongoing pace, the current account balance for the financial year 25 is expected from GDP -0.5 % to 0.5 %. According to the report, this balance is expected to provide cushions against less financial reasons and help strengthen external buffers.

The SBP governor mentioned that the central bank has successfully built foreign foreign exchange (FX) buffers through FX purchases, which has the help of an external current account. The purpose of the SBP is to increase the FX reserves to $ 14 billion by June 2025. Currently, SBP reserves are $ 10.21 billion, enough to cover two months of imports.

The report highlights that workers’ productivity and weak growth in total factor productivity have negatively affected the country’s economic competition over time, which helps repeatedly in the boombest cycle. Therefore, it emphasizes the importance of removing economic and structural obstacles to increase the production capacity.