(Web Desk Monitoring) –BMI, a Fitch Solutions company, has forecast that Pakistan Tehreek-e-Insaf (PTI) founder Imran Khan is unlikely to be released from prison anytime soon, while the coalition government led by Prime Minister Shehbaz Sharif may face significant challenges over the next 18 months due to economic uncertainties.

“Despite several successful legal appeals, opposition leader Imran Khan will remain imprisoned for the foreseeable future,” BMI predicted in its Pakistan Country Risk Report for the fourth quarter of 2024.

The report painted a bleak picture for the ruling alliance, which is considering banning PTI as a political party over its alleged anti-state activities following a favorable verdict by the country’s top court in its reserved seats case.

“We expect that the Pakistan Muslim League-Nawaz (PML-N)-led government will remain in power over the coming 18 months and will succeed in pushing through with International Monetary Fund (IMF) mandated fiscal reforms.”

BMI also suggested that in the unlikely event of the government’s ouster, a technocratic administration is more probable than fresh elections.

“In the unlikely event that the government is replaced, the most likely alternative is a technocratic administration rather than fresh elections,” the report stated.

The report highlighted the risks facing Pakistan, noting that the likelihood of negative events impacting future growth is higher than the chance of positive developments. This suggests a greater risk of setbacks, slowdowns, or other adverse consequences compared to improvements.

“The risks to our growth outlook are heavily weighted to the downside. Pakistan’s economy remains very fragile in the face of external shocks. Given that 40% of Pakistanis work in agriculture, another flood or drought would pose a significant risk to the economy. The country’s fragile political situation could also derail the recovery,” BMI said.

It noted that while parties managed to form a new coalition government following the February election, the strong electoral performance of independent candidates was backed by jailed PTI leader Imran Khan.

“Another round of protests in urban areas could disrupt economic activity,” BMI warned.

On the economic front, BMI does not foresee an imminent crisis but cautioned that much depends on political stability and favorable climatic conditions for agriculture.

“As we had predicted, economic activity in Pakistan was stronger than most analysts had expected in the fiscal year 2023-24 (July 2023-June 2024). Economic growth in Pakistan will accelerate from 2.4% in the fiscal year 2023-24 to 3.2% in the fiscal year 2024-25, driven by monetary easing, improved agricultural output, and slowing inflation,” BMI said.

Regarding the current account deficit, BMI predicted it would remain small, widening from 0.8% of GDP in fiscal year 2023-24 to 1.0% of GDP in 2024-25.

BMI also projected that easing inflation would allow the State Bank of Pakistan (SBP) to reduce its key policy rate from 22% to 16% in 2024, with further reductions to 14% by the end of 2025.

“The key risk to this forecast is faster-than-expected inflation, which would cause policymakers to slow their easing cycle,” BMI added.

4o