Fitch report

In its recent assessment, the global credit rating agency Fitch has offered a rather optimistic view of Pakistan’s economic trajectory, highlighting the country’s progress in stabilising its financial landscape. Since 2022, when former prime minister Imran Khan lost power, sceptics and critics have repeatedly raised concerns about a potential default. First, the PML-N-led coalition government and then the PML-N government had to implement several stringent and unpopular measures to address economic challenges. It seems that the country’s efforts are finally receiving the recognition they deserve. In its latest note, Fitch says that Pakistan had made significant progress in restoring economic stability and rebuilding external buffers, pointing to a tentative recovery from previous economic vulnerabilities. Last year, Fitch upgraded Pakistan’s long-term foreign-currency issuer default rating (IDR) from CCC to CCC+, a move largely attributed to the country’s successful negotiation of a deal with the IMF. However, despite this upgrade, the rating still reflects persistent risks regarding Pakistan’s ability to meet its debt obligations.

Fitch notes that Pakistan’s economy is improving due to more stable conditions and lower interest rates. The State Bank of Pakistan (SBP) has reduced the interest rate to 12 per cent from 22 per cent, paving the way for increased economic activity. Fitch has also projected that Pakistan will register an economic growth rate of 3.0 per cent this year. However, despite this progress, the country still faces significant challenges in repaying its large external debts – over $22 billion in the next fiscal year. Securing adequate financing remains a critical risk, and any delays in IMF reviews or further financial deterioration could negatively impact its credit rating. While these signs are promising, it is time for authorities to address the elephant in the room. Years of economic instability and high prices have severely impacted the private sector, with many companies struggling to sustain their workforce. Instead of offering timely salary increments, many businesses are taking advantage of the weak job market, exploiting employees who have limited options.

The fact is that such encouraging economic figures do not really equate to an all-is-well situation. With rapid technological advancements, many workers are at risk of job displacement, yet there is no clear plan to integrate those who may soon become redundant – posing further financial challenges for single-income households. Automation and artificial intelligence are transforming industries, and without a proactive strategy, Pakistan risks exacerbating unemployment and social inequality. Then there are climate-related disasters, which have caused significant economic losses, forcing many to migrate to already overcrowded urban centres in search of work. The government must acknowledge these looming threats and take decisive action to create sustainable opportunities for its citizens. Economic growth cannot be truly meaningful unless it translates into tangible improvements in people’s lives. Investments in education, vocational training and social welfare programmes will be crucial in ensuring that economic gains are equitably distributed because, without inclusive growth, even the most promising financial indicators will remain hollow victories.