Moody’s Investors Service warned that Pakistan is at an increased risk of a failure to restart its $6.7-billion bailout program with the International Monetary Fund (IMF), stalled since November last year, pushing the country closer to a sovereign default, reported Bloomberg.
“There are increasing risks that Pakistan may be unable to complete the IMF programme that expires at the end of June,” Grace Lim, a sovereign analyst with the ratings company in Singapore, was quoted as saying by Bloomberg on Wednesday.
“Without an IMF programme, Pakistan could default, given its very weak reserves.”
The ratings agency had earlier warned Pakistan could default without the IMF bailout.
Meanwhile, Pakistani authorities have been scrambling to appease the international lender, with a financing gap of around $2 billion and exchange-rate policy among the biggest hurdles, said the report on Wednesday.
The Pakistani government on several occasions has reiterated that it has met all conditionalities of the multilateral agent.
“We are still very hopeful that the IMF programme will materialize,” PM Shehbaz Sharif told Anadolu in Ankara, earlier this month. “Our ninth review by the IMF will match all terms and conditions and, hopefully, we’ll have some good news this month,” he said.
Meanwhile, Bloomberg said while the government has pledged to meet billions of debt obligations, investors remain skeptical as the country’s dollar bonds are trading in distress.
“The country’s $1 billion bond due in April next year was little changed at about 55.6 cents on the dollar in Asian trading on Wednesday, after sliding almost 3 cents in the previous two days,” said the report.
Meanwhile, the Pakistani rupee may face further downward pressure, Lim said in an emailed response to questions.
“The IMF’s comments on the exchange rate likely referred to the gap in the inter-bank and retail markets,” she said.
Moody’s analyst said that Pakistan’s financing options beyond June are highly uncertain, even as its external repayments will remain significant over the next few years.
“Continuing the engagement with the IMF would support additional financing from other multilateral and bilateral partners, which could reduce default risk,” she said.
It is pertinent to mention that the ongoing IMF programme is scheduled to expire on June 30.
Last week, Finance Minister Ishaq Dar said the newly elected government should negotiate a fresh deal with the international lender.
“We are hopeful the ninth review is completed successfully, as it is necessary for Pakistan,” said Dar during the question-and-answer session following the unveiling of the Economic Survey 2022-23.
“After this, it will be only fair that it be the prerogative of a new government, after elections, to negotiate any new programme with the IMF,” he said.