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Is Pakistan defaulting soon?

The stakes are significant as Pakistan is now experiencing a balance of payments crisis. The possibility of the nation defaulting on its commitments for making foreign payments exists without the financial support of the International Monetary Fund (IMF).

Sadly, indications indicate that the IMF is not persuaded by the guarantees provided to them by Pakistan’s friendly nations.

According to unnamed finance ministry officials, Pakistan has met all of the requirements set forth by the lender for the renewal of the loan facility. The staff-level agreement for the ninth review was due for signing on February 9.

The IMF program’s delay, however, could have very negative effects. It is likely to have an impact on the budget planning, which is anticipated to be presented in the second week of June.

As its funding options beyond June are uncertain, Moody’s Investor Service has warned that Pakistan may default if it does not receive a bailout from the IMF.

Pakistan is anticipated to make its external obligations through the end of this fiscal year in June, but its reserves are thin, and it risks defaulting without IMF assistance.

Due to the government’s failure to comply with some loan requirements, Pakistan is attempting to resume a $6.5 billion IMF bailout program that has halted. Political tensions ahead of elections are further increasing the likelihood that the loan may be delayed.


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An ongoing relationship with the IMF after June would encourage further financing from other multilateral and bilateral partners, thus lowering the risk of default. With only $4.5 billion, Pakistan’s foreign exchange reserves are still incredibly low and only have enough money to pay around one month’s worth of imports.

According to S&P Global Ratings, Pakistan’s gross external finance needs will increase from 133 percent in fiscal year 2023 to 139.5 percent in fiscal year 2024 as a percentage of current-account receipts plus useable reserves.

According to S&P analysts, an IMF programme would serve as a framework for significant fiscal policy reforms, and an agreement on the current review cycle might give other bilateral and multilateral lenders to Pakistan more assurance.

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