Pakistan Struggles To Revive Economy

Pakistan is cutting rates again. The central bank is expected to lower interest rates for the fourth consecutive time to help revive its fragile economy.

After raising the benchmark rate to a high of 22%, the State Bank of Pakistan has already dropped it to 17.5% over three meetings, with analysts anticipating another cut of 150 to 250 basis points next week. This follows the IMF’s recent $7 billion support package, which has helped stabilize economic activity and bring inflation down from record highs.

Inflation eased to 7.2% in October, slightly above government expectations but well below the nearly 40% peak in May 2023. Inflation may rise again in 2025 due to higher energy tariffs under IMF conditions.

The current rate cuts aim to boost growth. IMF projects GDP to reach 3.2% by 2025.

Still, high electricity and gas costs coupled with global supply challenges, could limit gains for Pakistan’s manufacturing sector.