MUMBAI: Pakistan’s liquidity risks will remain high even if a new stand-by arrangement (SBA) with the International Monetary Fund (IMF) is approved, Moody’s Investors Service said on Tuesday.
The South Asian country secured a badly needed $3 billion short-term financial package from the IMF on Friday, giving its crisis-hit economy a much-awaited respite as it teeters on the brink of default.
“We expect government liquidity risks to remain high, even if the new SBA is approved. It is uncertain whether Pakistan will secure the full $3 billion of IMF financing during the nine-month program,” Moody’s said in a statement.
“The government’s commitment to continually implement reforms, particularly revenue-raising measures, will also be tested as it prepares for elections due by October.”
The new IMF financing on its own will not be enough to allow Pakistan to meet all its external debt repayments, Moody’s said.
However, an IMF disbursement is likely to catalyze financing from other bilateral and multilateral partners, which will be as critical in aiding Pakistan meet its financing needs, it said.
“Pakistan will need a longer-term financing plan to meet its large external financing needs over the next few years,” it said.
Pakistan could look at another IMF program which could be in place for a few years but this is likely to become clear only after the general election, it said, adding that negotiations over future programs would take time even if they do succeed.
“Until a new program is agreed, Pakistan’s ability to secure loans from other bilateral and multilateral partners will be severely constrained beyond the period of this new SBA.
