Pakistan is reportedly strategizing to secure a fresh loan of at least $6 billion from the International Monetary Fund (IMF) to address imminent debt obligations. The plan involves engaging in negotiations for an Extended Fund Facility with the IMF, and talks are anticipated to kick off in March or April, as per statements from a Pakistani official. Following a temporary IMF bailout that averted default last summer, the existing program is slated to conclude next month. Consequently, the incoming government must navigate negotiations for a longer-term arrangement to maintain stability in Pakistan’s $350-billion economy.
The lead-up to the previous bailout saw Pakistan implementing a series of measures mandated by the IMF. These included revising the national budget, raising the benchmark interest rate, and implementing hikes in electricity and natural gas prices. However, there has been no immediate response from the IMF or Pakistan’s caretaker finance minister regarding the latest developments, as reported by Bloomberg.
Fitch, a prominent ratings agency, has underscored the vulnerability of Pakistan’s external position, emphasizing that securing financing from both multilateral and bilateral partners is poised to become one of the most urgent challenges for the incoming government. In a statement on Monday, Fitch stated that a new deal is pivotal for Pakistan’s credit profile, assuming negotiations will be successfully concluded within a few months. Nevertheless, the ratings agency cautioned that a protracted negotiation process or the failure to secure the loan could exacerbate external liquidity stress, heightening the likelihood of a default. As such, the successful negotiation of a new IMF deal emerges as a critical factor in shaping Pakistan’s economic trajectory in the coming months.
