FITCH Solutions Country Risk & Industry Research and Independent Sources forecast Pakistan’s economic and financial conditions. FITCH had predicted earlier that Pakistan’s rupee would be devalued to RS.248 per dollar; however, current conditions have changed its views as it depreciated to RS.269.63 against the dollar. According to FITCH, the devaluation in the rupee will impact Pakistan’s economy in several ways, like securing a loan from the IMF hike in the imported inflation due to the high cost of payments. The weakening rupee will force the State of Bank Pakistan (SBP) to have a steeper monetary policy, i.e., a high-interest rate.
PAK rupee showed a sharp decline in value when foreign exchange companies decided to ease the control on the exchange rate on 25th January 2023. Initially, SBP intervened, but later it lost control over it. Depreciation in the rupee proved it. International Monetary Fund also requires a flexible exchange rate determined by the free-market forces’ demand and supply.
Pakistan’s economic growth will decline by 0.3 percent in 2022-23 compared to the prediction of 0.2%. The reasons behind this are rising domestic inflation, floods, and global macroeconomic factors. FITCH awarded CCC+ ratings (currently vulnerable and dependent on favorable economic conditions to meet its commitments in Ratings) on 21st October 2022.
Predicted effects were also observed in the steel industry. Pakistan, a persistent seaborne scrap importer, had shown a decline in its imports by 28/% (above 4 million to 3 million) in 2022. The decline in imports is due to political instability, rupee depreciation, floods, and the shutdown of the mills.
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