KARACHI: Pakistan is at risk of default on its debt obligations without an International Monetary Fund (IMF) bailout, the latest reports quoted the report of Moody’s Investor Service.
According to Grace Lim, a sovereign analyst with the ratings company in Singapore, Pakistan’s ability to secure financing beyond June is highly uncertain.
The situation in Pakistan is a cause for concern not only for the government but also for businesses and individuals across the country. Defaulting on debt obligations could lead to a severe economic crisis, with the potential to impact people’s livelihoods and push more people into poverty.
While Pakistan is expected to meet its external payments for the remainder of the current fiscal year ending in June, Moody’s has warned that without an IMF program, the country could default given its very weak reserves.
Pakistan’s foreign-exchange reserves, which stood at $4.5 billion, remained extremely low and are sufficient to cover only about one month of imports.
The Pakistani government is facing difficulties in reviving a stalled $6.5 billion bailout program from the Washington-based lender due to unfulfilled loan conditions. The situation is further complicated by political tensions ahead of the upcoming elections, with former premier Imran Khan showing no signs of backing down against the government and military, raising concerns of a possible delay in the loan.
An engagement with the IMF beyond June, according to Grace Lim, would help Pakistan secure additional financing from other bilateral and multilateral partners, reducing the risk of default. The reports suggested that the S&P Global ratings estimated that Pakistan’s gross external financing needs as a proportion of current-account receipts plus usable reserves will rise to 139.5% in fiscal year 2024 from 133% in 2023.
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S&P’s Andrew Wood believes that the IMF program is essential for implementing fiscal policy reforms, which could increase confidence among other lenders to Pakistan. However, the IMF’s schedule of board meetings does not include Pakistan until May 17.
Funding will also not be available from international financial institutions as the staff-level agreement has not been reached. Besides it, if transactions with the IMF are not concluded, it could impact the budget-making process
