Citi expects Pakistan to strike new $8bn IMF deal by end-July

LONDON: Wall Street bank Citi expects Pakistan to reach an agreement with the International Monetary Fund (IMF) for a new four-year programme of up to $8 billion by end-July, and recommends going long on the country’s 2027 international bond.

Pakistan last month completed a short-term $3-billion Stand-By Arrangement but Islamabad has stressed the need for a fresh, longer term programme.

“While longer-term challenges pertain, we see several positive catalysts supporting the Eurobonds,” Nikola Apostolov at Citi wrote in a note to clients.

“First, a larger and longer IMF EFF (Extended Fund Facility) program could be finalised by July – possibly a $7-8 billion 4-year program and secondly and a possible inflow of Saudi investments,” Apostolov said after a team from Citi visited Pakistan and met policymakers, including Finance Minister Muhammad Aurangzeb.

An IMF mission is expected to visit Pakistan to discuss the financial year 2025 budget, policies, and reforms under a potential new programme, according to the Fund.

“The aim is to lay the foundation for better governance and stronger, more inclusive, and resilient economic growth that will benefit all Pakistanis,” said IMF Resident Representative Ether Perez Ruiz in a message to the media over the weekend.

Meanwhile, Citi said it expected Pakistan’s international 2027 bond to offer a sweet spot to investors with sufficient liquidity and large upside as risks of default dissipate further.

The 2027 maturity trades at 87.292 cents in the dollar, according to Tradeweb data.

The country’s shorter-dated bonds – maturing 2025 and 2026 – are trading at 91-96 cents following a sharp rally since late last year. Pakistan’s international bonds had sunken to as little as mid-20 cents in the dollar in 2022.