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.