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ISLAMABAD: Pakistan’s banks are set to benefit from better opportunities to generate business volumes due to improving operating conditions amid receding macroeconomic headwinds, Fitch Ratings said in its latest report. 

Pakistan’s economy has shown signs of stabilization in recent months after securing a $7 billion International Monetary Fund (IMF) bailout program in September 2024, which helped restore investor confidence. Ratings agencies have since upgraded the country’s sovereign credit profile, citing fiscal reforms, lower inflation, and easing external pressures.

“Pakistan’s banks are set to benefit from better opportunities to generate business volumes due to improving operating conditions amid receding macroeconomic headwinds,” Fitch Ratings said, adding that the view was reinforced by the country’s improved sovereign credit profile following its upgrade of Pakistan’s Long-Term Issuer Default Rating to ‘B-’/Stable from ‘CCC+’ in April 2025.

Fitch said Pakistan’s economic recovery comes after “a period of significant turmoil and high inflation,” with real GDP growth expected to accelerate to 3.5 percent by 2027 from 2.5 percent in 2024.

“Consumer price inflation eased to 4.1 percent in July 2025 from its peak of 38 percent in May 2023, and we expect it to average around 5 percent in 2025,” the ratings agency noted.

The statement pointed to monetary easing and currency stability as drivers of recovery:

“The halving of the policy rate since May 2024 to 11 percent and a stabilizing external position, evident in lower currency volatility and current account surpluses, should support this recovery.”

Fitch said that while lower rates and a steadier macroeconomic environment should stimulate private credit demand and reduce banks’ dependence on lending to the public sector, risks remain.

“The banks’ intrinsic creditworthiness will likely remain closely linked to the sovereign and the pace of economic reform in the near term given their significant holdings of sovereign securities and loan exposures to state-linked entities.”

Pakistani banks have posted resilient results despite recent challenges, the agency added.

“The sector’s impaired loan ratio improved to 7.1 percent by March 2025 from 7.6 percent at end-2023, driven by strong loan growth of 26 percent amid high inflation.”

Return on average equity has “normalized to 20 percent in 1Q25, from around 27 percent in 2023,” while capital adequacy reached “a decade-high of 21 percent by March 2025.”

Fitch said that most large Pakistani banks “are well-positioned to navigate the transition to a more normalized operating environment of lower interest rates, although structural challenges persist.”

PESHAWAR, Pakistan: Anguished Pakistanis searched remote areas for bodies swept away by weekend flash floods as the death toll reached 277 on Monday, while one official replied to the lack of evacuation warnings by saying people should have built homes elsewhere.

A changing climate has made residents of northern Pakistan’s river-carved mountainous areas more vulnerable to sudden, heavy rains.

More than 150 people were still missing in the district of Buner in Khyber Pakhtunkhwa province after Friday’s flash floods.

Villagers have said there had been no warning broadcast from mosque loudspeakers, a traditional method for alerting emergencies in remote areas. The government has said the sudden downpour was so intense that the deluge struck before residents could be informed.

Emergency services spokesman Mohammad Suhail said three bodies were found on Monday. The army has deployed engineers and heavy machinery to clear the rubble.

On Sunday, provincial chief minister Ali Amin Gandapur said many deaths could have been avoided if residents had not built homes along waterways. He said the government would encourage displaced families to relocate to safer areas, where they would be assisted in rebuilding homes.

Residents said they were not living near streams, yet the flood swept through their homes. In Buner’s Malak Pur village, Ikram Ullah, aged 55, said people’s ancestral homes were destroyed even though they were not near the stream, which emerged in the area because of the flood. He said large boulders rolled down from mountains with the flood.

In flood-hit Pir Baba village, Shaukat Ali, 57, a shopkeeper whose grocery store was swept away, said his business was not near a river or stream but had stood for years alongside hundreds of other shops in the bazar. “We feel hurt when someone says we suffered because of living along the waterways,” Ali told The Associated Press.

Pakistan has seen higher-than-normal monsoon rains since June 26 that have killed at least 645 people across the country, with 400 deaths in the northwest. The National Disaster Management Authority issued an alert for further flooding after new rains began Sunday in many parts of the country.

In a statement, the military said the Pakistan Air Force played a key role in flood relief operations by airlifting 48 tons of NGO-provided relief goods from the port of Karachi to Peshawar, the regional capital. It said the air force established an air bridge to ensure the swift delivery of supplies.

On Monday, torrential rains triggered a flash flood that struck Darori village in northwestern Swabi district, killing 15 people, government official Awais Babar said.

He said rescuers evacuated nearly 100 people, mostly women and children, who had taken refuge on the roofs of homes. Disaster management officials said the floods inundated streets in other districts in the northwest and in Pakistan-administered Kashmir.

Prime Minister Shehbaz Sharif chaired a high-level meeting Monday to review relief efforts in flood-hit areas of Khyber Pakhtunkhwa as well as northern Gilgit-Baltistan and Pakistan-administered Kashmir.

At the meeting, officials estimated flood-related damages to public and private property at more than 126 million rupees ($450,000), according to a government statement.

The UN humanitarian agency said it had mobilized groups in hard-hit areas where damaged roads and communication lines have cut off communities. Relief agencies were providing food, water and other aid.

Flooding has also hit India-administered Kashmir, where at least 67 people were killed and dozens remain missing after flash floods swept through the region during an annual Hindu pilgrimage last week.

In 2022, catastrophic floods linked to climate change killed nearly 1,700 people in Pakistan and left hundreds of thousands homeless.