KARACHI: Pakistan’s financing options beyond June are “highly uncertain” and it could default without an International Monetary Fund bailout, Moody’s Investor Service said in its latest credit outlook released this week.
Pakistan and the IMF have been discussing fiscal policy measures in a ninth review since February, aiming to resume stalled funding of $1.1 billion due in November from a $6.5-billion program agreed in 2019 to Bloomberg on Tuesday.
The measures have fueled highest ever inflation, posted at 36.4 percent in April.
The IMF funding is crucial for Pakistan to avert default on its external payment obligations during a balance of payment crisis, in which foreign exchange reserves have shrunk to just four weeks of controlled imports.
“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 Moody’s ratings company in Singapore, was quoting as saying by Bloomberg.
“However, Pakistan’s financing options beyond June are highly uncertain. Without an IMF program, Pakistan could default given its very weak reserves.”
Last week the IMF said it was working with Pakistan to conclude the ninth review and supported Pakistani authorities “in the implementation of policies in the period ahead.”
This includes technical work to prepare the budget for fiscal year 2024, set to be passed by the National Assembly before end-June, mission chief Nathan Porter said.
As part of the conditions, Pakistan has given an assurance that its balance of payments gap this fiscal year, which ends in June, is fully funded.
Pakistan has announced pledges worth $3 billion in financing support from Saudi Arabia and UAE, but the funds have yet to come through. Longtime ally China has rolled over and refinanced its loans.
Islamabad and the IMF have had differences over the gap. It was not clear if the Saudi, UAE and Chinese financing would be sufficient, or if more external support would be needed.
It was also not immediately clear why the lender wanted to work on the technical preparation of the budget, which is not covered by the program.
