ISLAMABAD: Pakistan’s economic outlook is cautiously improving, with the possibility of further interest rate cuts and an anticipated rise in foreign exchange reserves, according to a new report by S&P Global Market Intelligence.
The report credits improved inflation management and a healthier current account balance for the State Bank of Pakistan’s (SBP) recent decision to cut interest rates by 11%—a more aggressive move than most analysts expected. S&P forecasts an additional 100 basis points cut by the end of 2025, citing room for further fiscal easing.
Foreign exchange reserves are projected to reach $14 billion by June 2025, supported by continued progress in Pakistan’s IMF program and sustained financial backing from allied nations and global lenders. These external inflows, S&P emphasizes, remain “indispensable” to maintaining macroeconomic stability.
Despite this progress, the report underscores Pakistan’s substantial financing needs, estimating the country will require around $27 billion annually to fulfill external obligations. It outlines $8 billion in payments due in 2025 and $9 billion in 2026. A key reprieve has come through the rescheduling of $16 billion in loans for the current year. For the remainder of 2025, an estimated $1.3 to $1.5 billion in payments is expected.
However, S&P cautions that global economic uncertainty—including potential U.S. tariffs and softening global demand—may compel the SBP to tread carefully with future monetary policy decisions.
The report presents a mixed picture for Pakistan’s industrial sector. While domestic manufacturing showed growth in March 2025, marking a rebound in activity, new export orders declined for the first time since May 2024—raising concerns about the sustainability of the recovery.
Additionally, rising input and energy costs could drive up product prices in the coming months, potentially reintroducing inflationary pressures despite current easing.
