File photo. Rizwan Tabassum—AFP
The Moody’s Investor Service has warned that Pakistan risks default without the resumption of an International Monetary Fund (IMF) program, as its financing options after June remain “uncertain.”
A Bloomberg report quoted Grace Lim, a sovereign analyst with Moody’s in Singapore, as saying that the ratings company expected Pakistan to 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 program, Pakistan could default given its very weak reserves,” she added.
Pakistan’s $6.5 billion IMF program has been stalled since November, with the delay in completion of the ninth review raising questions about the remainder of the bailout, which is set to expire in June. Initially, the government was dithering on implementing reform measures, including imposing higher taxes, but has since fulfilled most prior conditions, barring securing financial support that authorities maintain would be unlocked once the IMF deal is revived. The delay has, partly, been attributed to political instability, as deadlock persists between the Pakistan Tehreek-e-Insaf of Imran Khan and the government over a date for elections.
According to Bloomberg, Lim said an engagement between the IMF and Pakistan beyond June would “support additional financing from other multilateral and bilateral partners, which could reduce default risk.”
Pakistan currently has foreign exchange reserves of just $4.5 billion, barely sufficient to cover about a month of imports. Despite several steps by the government to bolster these, including rolling over loans, it has struggled to overcome the shortage caused by a series of unsustainable subsidies.