ISLAMABAD: Fitch Ratings, a global credit rating agency, has upgraded Pakistan’s long-term foreign currency issuer default rating (IDR) to ‘CCC+,’ the agency said on Monday, indicating an increase in the country’s foreign exchange reserves, while the central bank cut the key interest rate by 100 basis points to 19.5 percent in line with expectations of investors and analysts.
Fitch Ratings provides independent opinions on the creditworthiness of issuers and their debt obligations by evaluating the likelihood of repayment, and assigns ratings to help investors assess the risk of lending to or investing in a particular entity.
The upgrade reflects greater certainty over continued availability of external funding, in the context of Pakistan’s staff-level agreement with the International Monetary Fund (IMF) on a new 37-month, $7 billion extended fund facility (EFF).
“Strong performance on the previous, more temporary IMF arrangement helped the country narrow fiscal deficits and rebuild foreign exchange (FX) reserves, and further improvements are likely,” the ratings agency said in its report.
But it said the South Asian nation’s large funding needs put it in a “vulnerable situation,” if it failed to implement challenging reforms that could undermine program performance and funding.
“The government will have to obtain new funding assurances from bilateral partners, chiefly Saudi Arabia, the United Arab Emirates and China, totalling about USD 4-5 billion over the duration of the EFF,” the report read.
“We believe this will be achievable, given the strong past record of support and significant policy measures in the recent budget for the fiscal year ending June 2025 (FY25).”
Fitch said the incumbent Pakistani government aimed to tackle weaknesses in the country’s tax system, energy sector and state-owned enterprises under the new EFF through higher taxes on the country’s agricultural sector.
“We forecast the current account deficit to stay relatively contained at about $4 billion (about 1 percent of GDP) in FY25, after about $700 million in FY24, given tight financing conditions and subdued domestic demand,” the agency said.
Finance Minister Muhammad Aurangzeb said the rating upgrade came in the backdrop of currency stabilization, increase in foreign reserves and decline in inflation in Pakistan.
“This is a reflection of that journey in which we have been working hard for the last four to five months to get more permanence in the macroeconomic stability. Especially now with the staff-level agreement [with the IMF] having been in place, it has played a very important role in terms of helping with this upgrading,” he said in televised comments.
The minister said all macro-economic indicators in the country were “positive” and “in the right direction.”
“This [rating upgrade] is important because if we are to make this the last [IMF] program, there has to be a road to the market,” he said.
“As I also mentioned yesterday, export-led growth, foreign direct investment, which is again very much dependent on sovereign ratings, especially that foreign direct investment that can take us to exports and finally international capital markets, therefore, this particular upgrading is the beginning of that journey.”
‘GOOD NEWS FOR INDUSTRY’
The Fitch report came as Pakistan cut its key interest rate by 100 basis point to 19.5 percent, according to the central bank.
Finance Minister Aurangzeb described the rate cut as a “very good news for the industry.”
“As the inflation will decrease gradually, we will see the policy rate coming further down during this fiscal year. So that we go back into the private sector credit off-take, which has been stagnant for long,” he said in his televised comments.
“Both these developments that happened today, they are very positive for the economy as we go forward.”
The decision to cut policy rate was made in view of a decline in inflation, improving current account deficit and an increase in central bank reserves, according to the central bank chief.
“The current account deficit was $17.5 billion in fiscal year 22, which was reduced to $3.3 billion in 2023. This year, that number is only $700 million, which is 0.2 percent of the GDP,” State Bank of Pakistan (SBP) Governor Jameel Ahmed said at a press conference.
“Along with this, the state bank reserves have also witnessed improvement. In June 2023, our reserves were $4.4 billion, which have increased to $9.5 billion in June this year.”
He noted the country’s oil imports had gradually decreased and an improvement in external account inflows had strengthened the current account.
“Oil imports, which were at $2.3 billion in the first quarter of 2023, came down to $1.4 billion in the last quarter (Apr-Jun 2024),” Ahmed said. “This fiscal year, our GDP growth, which was 2.4 percent in the outgoing year, our assessment is that it will be between 2.5 percent and 3.5 percent.”
Similarly, the SBP chief said, the current account deficit was projected to be 0-1 this fiscal year, while average inflation would be 11.5-13.5 percent.
Fitch upgrades Pakistan’s foreign-currency debt rating, central bank cuts key interest rate
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Fitch upgrades Pakistan’s foreign-currency debt rating, central bank cuts key interest rate
- Fitch Ratings says Pakistan’s large funding needs put it in ‘vulnerable situation’ if it failed to implement reforms under new IMF deal
- Report came as Pakistan cut key interest rate by 100to 19.5 percent amid decline in inflation, improving current account, increase in reserves
Pakistani Olympic champion Arshad Nadeem named in Forbes 30 Under 30 list
- Nadeem bagged gold at the Paris Olympics 2024 with record-shattering 92.97 meter javelin throw
- In May, Nadeem won gold in Asian Athletics Championships in South Korea with 86.4 meter throw
ISLAMABAD: Pakistan’s Olympic gold medalist and star javelin thrower Arshad Nadeem has been featured in the Forbes 30 Under 30 list for South Asia in 2025, the international business magazine said in a report on Monday.
Forbes 30 Under 30 is an annual list published by Forbes since 2011 that recognizes outstanding individuals under the age of 30 across multiple industries.
Nadeem, 28, made headlines around the world when he threw the javelin over the 90-meter mark in August 2024 during the Paris Olympics. The record-shattering throw handed Pakistan its first Olympic medal since 1992. It was also the first-ever gold medal Pakistan had bagged in a track and field competition.
“Arshad Nadeem’s impressive javelin throws won Pakistan its first-ever Olympic gold for an individual sport in Paris 2024,” Forbes said in the report.
“Nadeem’s stunning show at the Paris Olympics though, set a new Olympic record for his 92.97m javelin throw.”
The magazine noted that Nadeem also won gold at the Islamic Solidarity Games in Turkiye and the Commonwealth Games in 2022, and secured a silver medal in the men’s javelin throw at the 2023 World Athletics Championships.
In May, Nadeem claimed gold with an 86.4-meter throw in the men’s javelin final at the Asian Athletics Championships in Gumi, South Korea.
He is the first Pakistani in over 50 years to win a gold medal at the Asian Athletics Championships. Pakistan’s Allah Daad had last topped the podium in javelin throw and Muhammad Younis won the 800-meter event in 1973.
He hails from the small town of Mian Channu and has since become a national hero, inspiring millions with his rise from modest beginnings to the top of the Olympic podium.
Pakistan repatriates 268 nationals from Iraq amid ongoing Iran-Israel conflict
- Pakistani nationals repatriated through two flights, from Basra to Karachi and Islamabad, says FO
- Thousands of Pakistani zaireen (pilgrims) travel annually to Iran and Iraq to visit the holy sites there
ISLAMABAD: Pakistan's foreign office said it repatriated 268 nationals from Iraq on Monday, as the Iran-Israel military confrontation enters its fourth day with no signs of either side letting up amid fears of a wider war breaking out in the region.
Thousands of Pakistani zaireen (pilgrims) travel annually to Iran and Iraq to visit holy sites there. Many have been stranded since Friday when Israel launched a massive wave of attacks targeting Iranian nuclear and military facilities but also hitting residential areas, sparking retaliation and fears of a broader regional conflict.
Pakistan last week advised its nationals to avoid traveling to Iran and Iraq amid surging tensions. Pakistan said it facilitated the evacuation of 450 nationals from Iran on Sunday.
"The Ministry of Foreign Affairs, in close coordination with Iraqi Airways, successfully facilitated the repatriation of 268 Pakistani nationals earlier today through two special flights from Basra to Karachi and Islamabad," the foreign office said.
"Both flights have safely reached Pakistan."
The foreign ministry said it remains engaged with Iraqi Airways and other Iraqi authorities to ensure the safe and timely return of the remaining Pakistani pilgrims in the country.
It advised Pakistani pilgrims in Iraq to remain in contact with the Pakistan Embassy in Baghdad and respective airlines for timely updates regarding their travel arrangements.
"All zaireen are further advised to remain prepared for travel at short notice," the ministry said. "The Ministry of Foreign Affairs continues to monitor the situation closely and remains fully committed to facilitating the safe and orderly return of all Pakistani zaireen."
Pakistan has condemned the Israeli strikes, calling them an unjustified violation of Iranian sovereignty, and has urged the international community to help de-escalate tensions through dialogue.
Iran has said over 200 people have been killed in Israel's onslaught since Friday, while Israel says Iranian strikes have killed at least 18 people.
Pakistan holds interest rate at 11% as Mideast conflict poses new economic challenges
- Central bank maintains cautious stance as heightened geopolitical tensions, volatile global oil prices add new inflation risks
- Leading Karachi-based business and trade body criticizes central bank’s decision, says will ‘dampen’ business sentiment
KARACHI: Pakistan’s central bank kept its key interest rate unchanged at 11% on Monday, maintaining a cautious stance, as financial analysts warn heightened Middle East tensions and volatile global oil prices add new risks to the country’s fragile external sector and inflation rate.
A Reuters poll released earlier on Monday had shown analysts revising their expectations for a rate cut in light of Israel’s military strikes on Iran that began on Friday and have since intensified, pushing up global commodity prices.
“The [Monetary Policy] Committee noted some potential risks to the external sector amidst the sustained widening in the trade deficit and weak financial inflows. Moreover, some of the proposed FY26 budgetary measures may further widen the trade deficit by increasing imports,” the central bank said, announcing its decision to leave the rate unchanged.
“In this regard, the Committee deemed today’s decision appropriate to sustain the macroeconomic and price stability.”
Monday’s decision comes days after Pakistan announced its Rs16.7 trillion ($62 billion) annual budget targeting 4.2% growth, up from a provisional estimate of 2.7% for the current year.
The MPC noted that despite the widening trade deficit, the current account remained broadly balanced in April, and foreign exchange reserves rose to $11.7 billion as of June 6 after the completion of the first review under the International Monetary Fund’s Extended Fund Facility. The country expects $14 billion foreign exchange reserves by the end June.
The bank paused its policy rate easing cycle in March, following cumulative cuts totaling 1,000 basis points from a record high of 22%, and resumed it with a 100-basis-point reduction in May.
Inflation in Pakistan has slowed markedly since peaking at around 40% in May 2023. However, last month it rose to 3.5% year-on-year, above the finance ministry’s projection of up to 2%, partly due to the fading of favorable base effects. The central bank projects average inflation between 5.5% and 7.5% for the fiscal year ending this month.
“Going forward, inflation is expected to trend up and stabilize in the target range,” the MPC said.
The escalating tensions in key oil-producing regions have triggered a sharp surge in global oil prices with brent, West Texas Intermediate (WTI) and Arab Light crude oils showing a 12% week-on-week increase and daily spikes exceeding 6%, Arif Habib Ltd, a Karachi-based research firm, said in its latest note.
‘WAIT-AND-SEE’ STANCE
Amreen Soorani, the head of research at Al Meezan Investment Management, said the SBP’s decision was primarily driven by emerging geopolitical risks that had affected international oil prices.
“Even with substantial improvements in Pakistan’s inflation and external account, the central bank seems to have taken a cautious “wait-and-see” stance,” she told Arab News.
The regional tensions, she said, were posing potential challenges to Pakistan’s balance of payment and inflation rate. Cash-strapped Pakistan spent $17 billion on oil imports last year.
Soorani said petroleum was a major driver of Pakistan’s trade deficit, accounting for approximately 30% of all imports and consuming around 55% of export proceeds.
“All else being equal, a $5 per barrel increase in average oil prices for the year would worsen our trade deficit by an estimated $900 million annually,” the analyst said.
Pakistan is closely watching the global oil market, where brent and WTI crude traded at around $73.5 and $70.5 a barrel on Monday and fell 1% after opening lower in the Western markets, Finance Adviser Khurram Schehzad said.
“Global calls for increasing supplies is (are) one of the reasons among potential resolve of the Israel-Iran conflict by the US,” Schehzad said.
Muhammad Waqas Ghani, head of research at JS Global Capital Ltd., said the SBP’s current monetary stance was aligned with the IMF’s recommendation to Islamabad to maintain a sufficiently tight monetary policy to anchor inflation.
“Additionally, the committee may have preferred to wait for greater clarity on the budget measures and their potential impact on inflation dynamics,” he told Arab News.
STOCKS GAIN, RUPEE DECLINES
Pakistani stocks gained by 82 points to close at 122,225 points “despite geopolitical risk amid speculations over SBP policy announcement,” Ahsan Mehanti, chief executive officer at Arif Habib Commodities Ltd, said.
The rupee declined for the fifth consecutive session and inched down 0.07% to Rs283.17 per dollar. Qazi Owais Ul Haq, a currency dealer at Arid Habib Ltd. said Pakistan’s currency was “feeling the heat” as regional tensions surge.
“They are trying to hold the rate but as a third-world country war affects us,” Haq told Arab News.
Pakistan’s top trade body, the Federation of Pakistan Chamber of Commerce & Industry (FPCCI) and the Karachi Chamber of Commerce and Industry, (KCCI) said the central bank’s decision to maintain the policy rate at 11% was disappointing
“The SBP has not only ignored market signals but has also dampened business sentiment at a time when the economy urgently requires a boost,” KCCI President Muhammad Jawed Bilwani in a statement.
Pakistan’s Punjab unveils $18.9 billion budget, increases development spending by 47%
- Punjab allocates $4.40 billion for development budget, $2.88 billion for education and $2.24 billion for health sectors
- Provincial government proposes increase in minimum wage from $131 to $142 per month
ISLAMABAD: Pakistan’s largest and richest Punjab province on Monday unveiled its Rs5.33 trillion [$18.9 billion] budget for the fiscal year 2025-26, increasing its development spending by 47% and refraining from imposing new taxes on the masses.
Punjab, home to more than half of Pakistan’s over 240 million people, plays a dominant role in the national economy. It contributes roughly 60% to Pakistan’s gross domestic product and receives the largest share of federal funds under the National Finance Commission (NFC) Award.
Last year, Punjab’s budget for FY2024–25 was about $19.6 billion, with a development outlay of $3 billion. Punjab’s budget is seen as politically significant for the ruling Pakistan Muslim League-Nawaz (PML-N) party of Prime Minister Shehbaz Sharif, which has faced tough economic and governance challenges since forming its government at the center last year.
“The total outlay for [Punjab’s] 2025-2026 budget is Rs5,335 billion [$19.2 billion],” Punjab Finance Minister Mujtaba Shuja-ur-Rehman said while presenting the budget in the provincial assembly.
Rehman said the provincial government was presenting a “record-breaking development budget” this time.
“For which the total amount recommended is Rs1,240 billion [$4.36 billion], which is more than 47% compared to the current financial year,” he added.
The minister said the FY26 budget did not contain any new taxes on the masses, adding that the government wanted to widen the tax net to increase revenue.
Punjab’s own-source revenue is projected at Rs828.1 billion ($2.94 billion), including Rs524.7 billion ($1.86 billion) in tax receipts and Rs303.4 billion ($1.08 billion) in non-tax receipts.
According to budget documents seen by Arab News, the Federal Board of Revenue (FBR) has set a national target of Rs14,131 billion ($50.11 billion), with Punjab’s share estimated at Rs4,062.2 billion ($14.4 billion).
Rehman said the province has proposed a significant increase in education and health budgets to benefit the people of Punjab.
HEALTH, EDUCATION BUDGETS
“The total allocation for the education sector is Rs811.8 billion ($2.88 billion), which is 21% higher than last year, where development allocation stands at Rs148.5 billion ($526 million), the highest in the province’s history and 127% higher than the previous year,” he said.
He said Punjab would launch new education projects while continuing existing ones, allocating Rs15 billion ($53 million) for scholarships for high-achieving students and continuing with its Rs5.9 billion ($21 million) Undergraduate Scholarship Programme.
“To address infrastructure needs, Rs40 billion ($142 million) is set aside for building classrooms, while a Rs35 billion ($124 million) Education Delivery Programme aims to enhance access and quality across Punjab,” Rehman said.
The minister said the provincial government has allocated Rs630.5 billion ($2.24 billion) for the health sector in this budget, which is 17% higher than last year.
“Of this, Rs181 billion ($641 million) is earmarked for development, reflecting a 41% increase over the previous year,” Rehman said.
The minister said Punjab had allocated Rs494 billion ($1.75 billion) for the social sector, which accounted for 40% of the development budget.
Rehman said provincial government employees’ salaries would be increased by 10%, while pensions have been raised by 5% and the proposed increase in the minimum wage is from Rs37,000 ($131) to Rs40,000 ($142) per month.
The minister said that the new budget has given special priority to Pakistan’s agriculture sector.
“In the next financial year, Rs123 billion ($436 million) are allocated for development in the agriculture, livestock, irrigation, and water sectors, while Rs56.2 billion ($199 million) is allocated for non-development expenses,” he said.
The provincial minister said to ensure a climate-resilient Punjab, a record Rs795 billion (approximately $2.82 billion) worth of projects were included in the budget this year, accounting for 64% of the overall development budget.
Pakistan’s top revenue-generating Sindh province last Friday unveiled its Rs3.45 trillion ($12.41 billion) new budget while the northwestern Khyber Pakhtunkhwa (KP) province announced a surplus budget of Rs2,119 billion ($7.63 billion) for the next year on the same day.
Pakistan says armed forces ‘fully alert’ amid Israel’s ongoing conflict with Iran
- Israel attacked Iran’s nuclear facilities and military leadership last week, raising tensions in Middle East
- Deputy PM Ishaq Dar assures lawmakers Pakistan’s nuclear facilities remain safe amid ongoing conflict
ISLAMABAD: Deputy Prime Minister Ishaq Dar said on Monday that Pakistan’s armed forces were “fully alert” amid Israel’s ongoing military conflict with Iran, vowing to safeguard the country’s nuclear assets.
Dar’s statement came as the military conflict between Iran and Israel entered its fourth day on Monday, with no signs of the two sides letting up. The worst fighting between the regional foes began late Friday when Israel carried out strikes against Iran’s nuclear facilities and military leadership. So far, Iran says 224 people have been killed due to Israeli strikes while Tel Aviv has said at least 18 people have been killed by Iran.
During a senate session, opposition lawmaker Shibli Faraz questioned whether Pakistan’s nuclear facilities were safe in light of Israel’s recent strikes against Iran, urging the government not to be complacent in safeguarding them.
“Israel dare not look to Pakistan,” Dar said in response. “By the grace of god, Pakistan has the strength to respond to a brick with a stone, to any mala fide [intentions].
“I assure my brother the armed forces of Pakistan are fully alert. As they were alert during the India-Pakistan conflict,” he added.
The deputy prime minister was referring to India and Pakistan’s military conflict last month. The two countries pounded each other with missiles, drone strikes, fighter jets and artillery fire in a military conflict that lasted for four days before Washington brokered a ceasefire on May 10.
Dar said the Pakistani nation had developed its nuclear and missile defense system at a great cost and would protect them.
“These are the nation’s assets, these are the nation’s trust. This is the trust for the coming generation,” he said. “It is our responsibility to safeguard it unitedly, which we will do, are doing and will do it together.”
Israel sees Iran’s nuclear program as a threat to its existence. It said its strikes on Friday were designed to avert the last steps to the production of an Iranian nuclear weapon.
Tehran insists its nuclear program is entirely civilian and it does not seek an atomic bomb. The UN nuclear watchdog, however, reported Iran last week as violating obligations under the global non-proliferation treaty.
Pakistan has criticized Israel in strong words and repeatedly said Iran has the right to retaliate under the UN Charter. Islamabad has also vowed to offer diplomatic support to Iran at international forums.
