Moody’s Investor Service warned that Pakistan could default without an International Monetary Fund (IMF) bailout as its financing options beyond June are uncertain, Bloomberg reported Tuesday.
Grace Lim, a sovereign analyst with the ratings company in Singapore, said: “We consider that Pakistan will meet its external payments for the remainder of this fiscal year ending in June.”
“However, Pakistan’s financing options beyond June are highly uncertain. Without an IMF programme, Pakistan could default given its very weak reserves.”
The cash-strapped nation of over 220 million people is struggling to revive a $6.5 billion bailout programme from the Washington-based lender, which has stalled after the government failed to meet some loan conditions.
Political tensions ahead of elections due this year are adding to the risk of a delay in the loan, as former prime minister Imran Khan is showing no signs of backing down against the government.
Dollar bonds due in 2031 were indicated at 34.58 cents on the dollar on Tuesday near the lowest since November. The rupee has been trading near a record low.
Lim, in an emailed response to questions, said that an engagement with the IMF beyond June would support additional financing from other multilateral and bilateral partners, which could reduce default risk.
It should be noted that Pakistan’s foreign-exchange reserves — which stand at $4.5 billion — remain extremely low and sufficient to cover only about one month of imports, she said.
According to S&P Global Ratings, 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.
“We consider the IMF programme to be a foundation for important fiscal policy reforms,” said Andrew Wood, a sovereign analyst at S&P in Singapore. “Agreement on the current review cycle could also coalesce more confidence for other bilateral and multilateral lenders to Pakistan.”