By Naveed Naqvi
ISLAMABAD: Pakistan is at an increased risk of failing to complete its $6.7 billion bailout program with the International Monetary Fund (IMF), which expires at the end of June, Moody’s Investors Service said on Wednesday.
Pakistan’s IMF program runs out this month, with about $2.5 billion in funds yet to be released. The country is struggling with record inflation, fiscal imbalances, and critical levels of reserves that cover barely a month’s worth of imports.
The program has been stalled since November last year due to disagreements over financing the next fiscal year’s foreign debt.
“Without an IMF program, Pakistan could default, given its very weak reserves,” Grace Lim, a sovereign analyst with the ratings company in Singapore, said in an email to Bloomberg News.
Pakistan’s dollar bonds due in April next year were little changed at about 55.6 cents on the dollar on Wednesday, after sliding almost 3 cents in the previous two days. This indicates investor skepticism over Pakistan’s ability to meet its debt obligations.
The rupee may also face further downward pressure, Lim said, adding that the IMF’s comments on the exchange rate likely referred to the gap between the inter-bank and retail markets.
“Continuing the engagement with the IMF would support additional financing from other multilateral and bilateral partners, which could reduce default risk,” Lim said.
Finance Minister Ishaq Dar said last week that Pakistan will ask some of its bilateral creditors to ease its debt repayment terms. Though, he said he is hopeful that the ninth review of the current program will be completed successfully.
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