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Pakistan

Moody’s warns Pakistan could default without IMF bailout: report

  • Pakistan’s financing options beyond June are highly uncertain, says analyst with ratings agency
Published May 9, 2023

Moody’s Investors Service warned that Pakistan could default without an International Monetary Fund (IMF) bailout as the country faces uncertain financing options beyond June, reported Bloomberg on Tuesday.

“We consider that Pakistan will meet its external payments for the remainder of this fiscal year ending in June,” Grace Lim, a sovereign analyst with the ratings company in Singapore, was quoted as saying in an emailed response to Bloomberg.

“However, Pakistan’s financing options beyond June are highly uncertain. Without an IMF programme, Pakistan could default given its very weak reserves.”

Pakistan remains engaged with the Washington-based lender to resume its bailout programme that has been stalled at the ninth review since November last year.

Various measures including a floating exchange rate, additional taxes, and hike in energy tariffs have failed to convince the IMF to resume the bailout.

Instead, the IMF reiterated that it is working with Pakistani authorities to bring the pending ninth review to conclusion “once the necessary financing is in place and the agreement is finalised”.

Pakistan has secured nearly half of its necessary financing after its officials said Saudi Arabia and UAE have pledged providing a combined $3 billion.

However, the amounts are yet to be deposited in Pakistan’s central bank, and its official foreign exchange reserves still stand at a precarious level.

The country has been faced with a barrage of woes in recent months with the perceived default risk and downgrade by international ratings agencies reflecting the state of the economy that has also had to bear major political turmoil and frequent change in key leadership.

Engagement with IMF beyond June

An engagement with the IMF beyond June would support additional financing from other multilateral and bilateral partners, which could reduce default risk, said Lim.

S&P Global Ratings said Pakistan’s gross external financing needs as a proportion of current-account receipts plus usable reserves is estimated to rise to 139.5% in fiscal year 2024 from 133% in 2023, added the Bloomberg report.

“We consider the IMF programme to be a foundation for important fiscal policy reforms,” Andrew Wood, a sovereign analyst at S&P in Singapore, was quoted as saying by Bloomberg. “Agreement on the current review cycle could also coalesce more confidence for other bilateral and multilateral lenders to Pakistan.”

Back in March, Bloomberg economists said that the IMF could release funding to Pakistan by June under a bailout package, but warned the country could be heading towards default if this does not happen.

“Our base case is that the IMF will deliver the remaining $2.6 billion in aid under the current bailout program by June – helping Pakistan wiggle through the immediate crisis – as the country has fulfilled most of the IMF’s conditions,” wrote Bloomberg economists Ankur Shukla and Abhishek Gupta back then.

Meanwhile, the IMF Executive Board has issued meetings scheduled till May 17, but Pakistan is not on the agenda, reported Business Recorder on Tuesday.

According to the IMF Executive Board calendar available on its website, next meetings are scheduled for May 11, 15, and then again on May 17, 2023; however, Pakistan is not on the agenda though it could be added in the event that the ninth review is declared a success.

Comments

Comments are closed.

Mark May 09, 2023 12:23pm
Is Moody's towing IMF and IK line to discredit and denounce Pakistan.
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Nawaz un Sharif- HeapBigShit May 09, 2023 12:31pm
Nothing new in this statement by S&P. Default looms.
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Tulukan Mairandi May 09, 2023 12:50pm
Not "could", but definitely "would". In fact, a bailout will only delay the default not avert it.
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Tulukan Mairandi May 09, 2023 12:52pm
If IMF does not step in, we must hold China to it. Either bail us out or Pakistan will withdraw support for CPEC, China's occupation of Xinjiang and the genocide of Ughyurs, and support Taiwan's independence.
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Arshad May 09, 2023 12:55pm
BANKRUPT. LOUD & CLEAR.
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Turk Munday Maga May 09, 2023 01:07pm
Only if our beloved Khan was still our PM all this would have been avoided
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Saeed May 09, 2023 01:44pm
Bring IK and utilise overseas Pakistani in roshan digital account since govt change of IK overseas Pakistani revolt
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Sugon Dzntz May 09, 2023 01:57pm
Imran khan's ex wife has a relative form father's side who is friend of the father of modi CEO, thats why they are conspiring against IRoP
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Sugon Dzntz May 09, 2023 02:02pm
@Tulukan Mairandi, One China policy my friend. Unless you wnat to get beaten like if you remember chinese beating the crap out of policemen in Multan. Its goin to be next phase after this vigo phase.
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Muhammad Iftikhar May 09, 2023 02:05pm
Please do not support slavery. The intentions of these agencies is to make Pak slave for next 5-10 years again as they did in 2019. The only solution is to Minimise your imports by legalising Trade of Oil and Gas with Iran and save $20 bn per year. Increase your exports by providing raw material, power and whatever needed to industries.
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Saeed May 09, 2023 02:20pm
Thanx to takurbakar pdm government
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BK May 09, 2023 06:22pm
@John, How dare anyone question the noble army, the elites, the gods on earth?? Amazing to see these images play out on civilians...never have we seen even an army office let alone a general being mad-handled like this. IK IS Ex-PM of PAKISTAN...not an ordinary citizen....STOP THIS NONSESE ARMY, BEFORE THE COUNTRY REACHES A POINT OF NO RETURN. NEVER HAVE I FELT THIS HATRED FOR THE ARMY BEFORE...
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Muhammad Iftikhar May 09, 2023 08:23pm
Please do not support slavery. The intentions of these agencies is to make Pak slave for next 5-10 years again as they did in 2019. The only solution is to Minimise your imports by legalising Trade of Oil and Gas with Iran and save $20 bn per year. Increase your exports by providing raw material, power and whatever needed to industries.
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