Fitch Ratings expects Pakistan’s real GDP growth to accelerate from 2.5% in 2024 to 3.5% by 2027. The agency noted the recovery follows a period of high inflation and economic turmoil. Inflation eased significantly, with CPI dropping to 4.1% in July 2025 from a peak of 38% in 2023. Fitch forecasts inflation will average around 5% for 2025, supporting a more stable economic outlook.
Meanwhile, Pakistan’s banking sector is poised for growth due to improving economic conditions and lower interest rates. Fitch highlighted the halving of the policy rate to 11% since May 2024, which, along with better external stability, has reduced currency volatility and led to current account surpluses. These factors are expected to boost private credit demand and support stronger loan and deposit growth.
Fitch also praised Pakistan’s banks for their resilience during tough times, noting improvements in asset quality and financial performance. The impaired loan ratio dropped to 7.1% by March 2025, and return on equity normalized at 20%. The sector’s capital adequacy ratio hit a decade high of 21%, indicating strong internal capital generation. Despite some risks linked to the sovereign credit rating, banks are well-positioned for the medium term.
The rating agency emphasized that banks with diversified revenue streams and disciplined credit practices will benefit most from Pakistan’s stabilizing economy. Fitch also mentioned that ongoing fiscal and economic reforms could further strengthen banks by increasing private-sector credit and reducing reliance on public-sector lending. However, the sector’s success still depends heavily on economic reforms and sovereign stability.
Overall, Fitch upgraded Pakistan’s credit rating to ‘B-’ in April 2025, reflecting confidence in economic recovery and reform efforts. The agency expects Pakistan’s improving macroeconomic environment to create better business opportunities for banks and support sustainable growth through 2027.