*This analysis was produced by S&P Global Market Intelligence, not S&P Global Ratings, which is a separately managed division of S&P Global. Please attribute any commentary/data you cite from this analysis to S&P Global Market Intelligence.
Key highlights on the outlook include:
• Given improved inflation dynamics and stronger external balances, the State Bank of Pakistan (SBP) now has space to ease further, and S&P Global Market Intelligence projects another 100-basis-point rate cut by the end of 2025. Still, the central bank is expected to proceed cautiously due to global volatility, including the impact of US tariffs and softening external demand.
• The S&P Global HBL Pakistan Manufacturing PMI® for March 2025 shows that while domestic production continued to grow, new export orders contracted for the first time since the survey began in May 2024. Price pressures picked up, with firms citing higher input and energy costs. This could push output prices higher in the coming months and mildly lift headline inflation, which bottomed out in April, and is projected to rise modestly in the coming months due to seasonal demand and energy adjustments.
• SBP reserves are projected to be on track to reach US$14 billion by end-June. However, gross financing needs remain elevated at around US$27 billion annually. Even after regular rollovers, more than US$8 billion in residual external debt repayments are due in fiscal year 2025 and US$9 billion in fiscal year 2026. Progress on the IMF program, along with inflows from traditional bilateral partners and multilateral institutions, will remain essential to bridge this financing gap. US$16 billion of repayments have been rolled over for fiscal year 2025, and US$1.3 billion–US$1.5 billion is due in the remaining months, which is projected to be met.
