Moody’s Investors Service warns that Pakistan’s ability to secure loans from bilateral and multilateral partners will be severely limited
Published Date – Friday, 6/16/23 at 11:30pm
Karachi: Moody’s Investors Service has warned that Pakistan’s ability to secure loans from bilateral and multilateral partners will be severely constrained ahead of negotiations with the International Monetary Fund (IMF) on the new scheme, local media reported.
“Whether Pakistan will join another IMF program may only become clear after elections due in October 2023. Negotiations on any future IMF program will also take some time, even if They succeed.”
It further warned that Pakistan is unlikely to obtain market financing from Eurobonds or commercial banks at an affordable cost in the foreseeable future, Geo News reported.
In fiscal 2023, the government issued no Eurobonds and raised just 521 billion rupiah ($2.8 billion) from commercial banks, well short of the 1.4 trillion rupiah target set in the 2022-23 budget.
The country’s external debt repayments will remain high for the next few years, with repayments (principal and interest) due at around $25 billion in FY 2024, while foreign exchange reserves stood at a very low $3.9 billion as of June 2 .
“The outlook for external financing in Pakistan for FY2024 and beyond is very uncertain,” Moody’s said. “There is no guarantee that Pakistan will receive $2.4 billion from the IMF as budgeted,” Geo News reported.
The IMF has been negotiating with Pakistan on the ninth part of the $6.5 billion bailout package since last year. The program will expire at the end of June.
Moody’s said the government was considering rescheduling bilateral debt, but did not intend to contact the Paris Club or multilateral partners to reschedule the debt.
“Based on our definition, the mere suspension of debt service obligations to official creditors is unlikely to have an immediate rating impact,” the rating agency said. “Indeed, this relief will increase the financial resources available to the government for essential health, social and infrastructure spending.”
