Pakistan's economy stable, improving with interest rate cuts: Fitch report

Karachi: Economic rating agency Fitch has said in its report on Pakistan that Pakistan’s economic activities are stable and improving with the cut in interest rates.

The Fitch report says that Pakistan is making progress in restoring economic stability. Pakistan’s progress in structural reforms is important for its debt profile. Progress on difficult reforms is important for IMF reviews, and bilateral, and multilateral financing.

According to the Fitch report, the State Bank of Pakistan’s (SBP) interest rate cut to 12 percent is the reason for the decline in consumer inflation. The average inflation was 24 percent by June, which was slightly more than 2 percent in January.

The report further says that economic activities are stable and improving with the reduction in interest rates, while economic growth is estimated to be 3 percent.

In addition, due to remittances, agricultural exports, and tight monetary policy, the current account remained in surplus by $1.2 billion. Foreign exchange reserves are equal to three months of imports, but the reserves are less than the financial requirement.

According to the report, there are payments of $22 billion in the fiscal year 2025-2026, of which $13 billion is bilateral deposits, which we believe will be rollovers.

The Fitch report said that there has been some good progress at the economic level. Tax revenue in the first half of the fiscal year remained below the IMF target. The primary surplus remained above the IMF target, while the provinces have enacted legislation on agricultural income tax.

According to the report, the increase in foreign exchange reserves and the reduction in the need for external financing may be the reason for the positive rating in July, while the delay in the IMF review may be the reason for the negative rating.