Moody’s Investors Service has warned that Pakistan’s ability to secure loans from bilateral and multilateral partners will be severely constrained until a new programme is negotiated with the International Monetary Fund (IMF), local media reported.
The credit rating company, in an issuer comment report, said: “Whether Pakistan will join another IMF programme may only become clear after elections, which are due by October 2023. Negotiations for any future IMF programme would also take some time, even if they succeed.”
It further warned that Pakistan is unlikely to access market financing at affordable costs, either from Eurobonds or commercial banks, in the foreseeable future, Geo News reported.
In fiscal 2023, the government issued no Eurobonds and raised only Rs521 billion ($2.8 billion) from commercial banks, far short of the Rs 1.4 trillion target set in the fiscal year 2022-23 budget.
The country’s external debt repayment will remain high for the next few years, with about $25 billion of repayments (principal and interest) due in fiscal 2024, while foreign exchange reserves are very low at $3.9 billion as of June 2.
“Pakistan’s external funding prospects for fiscal 2024 and later are highly uncertain,” Moody’s said. “It is not guaranteed that Pakistan will be able to secure $2.4 billion from the IMF as budgeted”, Geo News reported.
The IMF has been in talks with Pakistan on the ninth tranche of a $6.5 billion bailout package since last year. The programme will expire at the end of June.
Moody’s said the government is considering rescheduling bilateral debts, but it does not plan to approach the Paris Club or multilateral partners to reschedule their debt.
“Under our definition, a suspension of debt service obligations only to official creditors is unlikely to have direct rating implications,” the rating agency said. “Indeed, such relief would increase the government’s available fiscal resources for essential health, social and infrastructure spending.”
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