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Pakistan likely to avert default this year after last-minute IMF deal: Bloomberg

  • Dollar funds could rise up to $9.5 billion on account of inflows from the IMF and friendly nations, but a new programme will be needed, says report
Published July 1, 2023

Pakistan is likely to avert default this year, stated Bloomberg Economics in a report on Friday, as the country managed to secure a last-minute International Monetary Fund (IMF) bailout.

“A last minute bailout from the IMF should help Pakistan avoid default this year,” Ankur Shukla, who covers South Asia at Bloomberg, stated on Friday.

Shukla was of the view that a staff-level agreement signed with the lender suggests aid will finally materialise after months of delay.

“But - even if it does – the country’s debt troubles won’t end there. More IMF aid will be needed in 2024,” he added.

The remarks come after the IMF announced on Friday that its staff and Pakistani authorities have reached an agreement on policies to be supported by a $3-billion, nine-month Stand-By Arrangement (SBA).

The staff-level agreement is subject to approval by the IMF Executive Board, with its consideration expected by mid-July.

“The new SBA builds on the authorities’ efforts under Pakistan’s 2019 EFF-supported programme which expires end-June,” Nathan Porter, IMF Mission Chief to Pakistan, was quoted as saying in the press release on the day the Extended Fund Facility expired.

Meanwhile, the Bloomberg report said the funding is likely to be delivered in tranches so that the IMF can make sure Pakistan makes progress on fiscal consolidation and continues to allow the rupee to trade freely.

“But chances seem high that the board will approve the funding because Pakistan in recent days has stepped up efforts to meet IMF demands. It’s raised taxes, cut spending in its budget, and hiked its key interest rate to a record at an unplanned meeting,” it said.

The funding from IMF would also unlock “another $3 billion in loans pledged by Saudi Arabia and the UAE,” it said.

“Together, the loans should allow the country to repay its debts through April 2024, assuming that the current account deficit for the fiscal year comes in below $4 billion as the central bank projects,” said Bloomberg.

The report projected that Pakistan dollar funds could rise up to $9.5 billion on account of inflows from the IMF and friendly nations. “(However), this won’t be enough to repay $8.7 billion in loans (net of rollovers) in the year starting July and also pay the country’s import bills for the full fiscal year.

“This means whoever is in power after elections in October will have to negotiate a new deal with the IMF,” it said.

The upcoming government would need to adhere to measures agreed with the IMF to secure another program next year, said the report.

“We have been expecting the aid to come. It should stabilise the economy and boost growth. We expect GDP to grow 2.5% in the fiscal year starting from July, up from 0.3% in the fiscal year through June 2023,” it concluded.

Comments

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Johnny Walker Jul 01, 2023 03:08pm
No default. I note that the Indian Trolls are silent today.
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Ash Chak Jul 01, 2023 04:24pm
Good news. For the next government to address the reforms , it needs to have a strong mandate. Hope the electorate puts aside their usual biases and votes for a pragmatic government. Maybe even have Atif Mian as FM. We can only dream.
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Naveed Aslam Maher Jul 01, 2023 05:11pm
Good
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Abdulrehman Haroon Jul 01, 2023 05:48pm
I want to know what Tuluman Mairandi has to say about this now. He was hell bent on saying that Pakistan will default and the dollar would cross the 350 mark.
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Abdulrehman Haroon Jul 01, 2023 05:50pm
The trolls like Tulukan Mairandi lay silent today. Gone back into hiding, have they?
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Ashfaq khan Jul 01, 2023 07:01pm
Bhai, read the article again, yes Pakistan survived, but not for long. Things will be very tough for next 1-2 years, unless we stop corruption, conduct reforms and bring big investment. Given sharifs and zaradaris history all 3 are not possible
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Bilal Bhutto Jul 01, 2023 07:19pm
Forigen minster now billions dollars for all luxury and expensive trip. These loan always for elite to maintain luxury life style .
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Notsurprised Jul 01, 2023 07:32pm
Only people sad are youthias. The definition of a traitor is those who would see their country suffer/harmed for their vile personal agenda. i.e. youthia
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Ali Asghar Saifuddin Jul 01, 2023 08:40pm
Woohoo...thulu mairandi from occupied Iindia seeking news of Pakistan's default since July 22 is nowhere to be seen
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Dr.Abdul Ghafoor Awan Jul 01, 2023 11:49pm
The deal with IMF will boost confidence in the market and root out speculations being spread by Anti-Pakistan lobby.The efforts of those,who ran the country successfully during very complicated situation, should be recognized and collective efforts should be made to pull the country out of financial and political crisis.
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Abs Jul 02, 2023 02:33am
@Ashfaq khan, with imran out, who originally was the reason for this close to default bad state economy, things will now prosper and hopefully we will see the pre 2018 period return for Pakistan.
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Awami Jul 02, 2023 08:01am
This good change for future
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Ashfaq khan Jul 02, 2023 05:21pm
@Abs, you are right, we have seen such a great progress in Sindh, it’s ok to accept that we are in a deep for next 10 Years
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