Pakistan’s economy will shrink by 0.3 percent
The research agency said, “We believe that the rupee’s weakness will continue, especially in Pakistan’s balance of payments position, which is likely to remain weak for several more months.” The agency said that much uncertainty remains at this juncture, so it is difficult to estimate the extent to which the latest devaluation has driven investor sentiment, according to The News. In its analysis, Fitch cautioned that a continued weakening of the rupee would also have macroeconomic implications in the near term.
This could add to imported inflation pressures and eventually lead to a hike in the policy rate from the SBP. The report said that Fitch expects Pakistan’s economy to shrink by 0.3 percent in fiscal year 2022-23. Fitch, however, noted that the rupee’s depreciation would help Islamabad secure more loans from the IMF, which would be positive for the long-term outlook, as it would help ease Pakistan’s balance of payments stress. The world’s fifth-largest population has less than $3.7 billion in state bank reserves, enough for just three weeks of the country’s imports, The News reports.
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