ISLAMABAD: A leading international financial information service warned on Wednesday Pakistan’s current political turmoil could derail its fragile national economy, despite recent improvements in macroeconomic indicators.
The warning was issued by Business Monitor International (BMI), part of Fitch Group, in a comprehensive country risk report on Pakistan, including 10-year forecasts extending to 2033.
The report noted the country’s economic activity in the last fiscal year was stronger than most analysts had expected.
However, it also highlighted several internal and external risk factors that could impact the ongoing economic efforts of Pakistan’s current coalition administration.
“The country’s fragile political situation could ... derail the recovery,” the BMI report noted. “While Pakistan’s establishment parties were successful in creating a new coalition government following the February election, the strong electoral performance of independent candidates backed by jailed opposition leader Imran Khan suggests that there is significant dissatisfaction with the current political elite. Another round of protests in urban areas could disrupt economic activity.”
The report also maintained Pakistan’s economy remained prone to other shocks.
“Given that 40 percent of Pakistanis work in agriculture, another flood or drought would pose a significant risk to the economy,” it added.
The BMI report said Pakistani policymakers were likely to miss their ambitious budget targets, though they would manage to narrow the deficit, “slipping from 7.4 percent in FY2023/24 to 6.7 percent of GDP in FY2024/25.”
It also predicted that the current government would remain in power over the coming 18 months and succeed in pushing through with the fiscal reforms recommended by the International Monetary Fund (IMF).
“In the unlikely event that the government is replaced,” it continued, “the most likely alternative is a military-backed technocratic administration rather than fresh elections.”
