Moody’s, in a recent statement, emphasized the importance of implementing long-term reforms in Pakistan to ensure macroeconomic stability. While the economy is expected to remain subdued, it is crucial for Pakistan to focus on revenue-raising measures. The statement highlighted that high-interest rates and inflation will limit government spending and business investments. However, the stand-by arrangement (SBA) approval is anticipated to provide some relief by moderately improving government liquidity.
Additionally, the financing received from the IMF will not only provide immediate support but also open doors for assistance from other bilateral and multilateral partners. Despite this positive development, Pakistan will still face challenges in repaying its external debt in the current fiscal year (FY24). Moody’s analyst, Grace Lim, expressed uncertainty about Pakistan’s ability to secure the full $3 billion financing from the IMF.
As Pakistan approaches the elections scheduled for October 2023, concerns remain regarding the government’s revenue-raising measures. To meet its significant financing needs in the coming years, Pakistan will require a robust long-term external financing plan. Moody’s further highlighted that securing ongoing loans will be severely restricted until a new program with the IMF is agreed upon. This program will likely occur after the elections and involve lengthy negotiations.
Recently, the IMF announced a staff-level agreement (SLA) with Pakistan for a $3 billion “stand-by arrangement.” Pakistan had anticipated the release of the remaining $2.5 billion from a previously agreed upon $6.5 billion bailout package in 2019. Unfortunately, the expiration of the package occurred on Friday due to the incomplete ninth review.
