Global credit rating agency Fitch has forecasted Pakistan’s real GDP growth at 3.5% by 2027, up from 2.5% in 2024, according to Fitch Ratings.
“Pakistan’s improved sovereign credit profile reinforces this view,” Fitch noted, referring to the upgrade of the country’s Long-Term Issuer Default Rating (IDR) to ‘B-‘/Stable from ‘CCC+’ in April 2025. The rating improvement was underpinned by ongoing economic recovery, reforms and improving fiscal performance.
The recovery comes after a particularly turbulent period for Pakistan’s economy. Inflation, which peaked at 38% in May 2023, has since eased to 4.1% in July 2025, with Fitch expecting it to average around 5% for the year.
Meanwhile, monetary policy has shifted in response to easing inflationary pressures. Since May 2024, Pakistan’s central bank has halved the policy rate to 11%, while external stability has improved through reduced currency volatility and current account surpluses.
Fitch anticipates that this combination of lower interest rates and a more stable macroeconomic environment will boost demand for private credit.
“We expect the combination of lower interest rates and an improving macroeconomic environment to stimulate private credit demand,” Fitch said, adding that this should support “steadier loan and deposit growth, and banks’ financial performance.”
The agency noted that Pakistan’s banks are set to benefit from better opportunities to generate business volumes due to improving operating conditions amid receding macroeconomic headwinds.
“Private sector credit, which had dropped to a cyclical low of 9.7% of GDP in 2024, is expected to rebound, reducing banks’ reliance on public-sector lending. Continued economic and fiscal reforms could further support this shift,” the statement read.
However, Fitch also pointed to ongoing risks, stating that Pakistan’s improving, albeit still weak, operating environment and its low sovereign credit rating remain areas of concern.
The agency cautioned that the banks’ intrinsic creditworthiness will remain “closely linked to the sovereign and the pace of economic reform,” due to their significant exposure to sovereign securities and state-linked entities.
Despite past economic turbulence, Pakistani banks have demonstrated resilience. The sector’s impaired loan ratio improved to 7.1% by March 2025, down from 7.6% at the end of 2023, amid strong loan growth of 26%, largely fueled by inflation.
