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.