Global credit rating agency Fitch has revised Pakistan’s economic outlook, predicting real GDP growth to reach 3.5% by 2027, up from 2.5% in 2024. The agency cited Pakistan’s improved sovereign credit profile, with its Long-Term Issuer Default Rating (IDR) upgraded to ‘B-‘/Stable in April 2025. This upgrade reflects ongoing economic recovery, fiscal reforms, and better financial performance after years of instability.
Inflation, which had peaked at 38% in May 2023, has significantly eased to 4.1% as of July 2025. Fitch expects inflation to average around 5% this year, allowing the central bank to cut interest rates from 22% in 2023 to 11% by mid-2024. Reduced currency volatility and current account surpluses have also contributed to greater macroeconomic stability, setting the stage for increased private-sector lending.
Fitch highlighted that lower interest rates and a more stable economy will likely boost private credit demand, supporting loan growth and improving bank profitability. Private sector credit, which had fallen to just 9.7% of GDP in 2024, is expected to rebound, reducing banks’ dependence on government borrowing. The agency noted that continued reforms could further strengthen this shift, benefiting both businesses and financial institutions.
However, risks remain, as Pakistan’s operating environment, though improving, is still fragile, and its sovereign credit rating remains low. Fitch warned that banks’ financial health remains tied to government policies and economic reforms due to their exposure to sovereign debt. Despite these concerns, Pakistani banks have shown resilience, with impaired loans declining and credit expanding by 26% in early 2025—a sign of cautious optimism for the future.
