Without IMF support?

Pakistan stays afloat even though the threat of a default on foreign financial obligations persists. And while Moody’s credit ratings agency sees the possibility of Pakistan defaulting on its external payments without an IMF bailout, Finance Minister Ishaq Dar is optimistic that the government will survive an acute balance-of-payments crisis even in the absence of a deal with the Fund. Dar’s optimism stems from the fact the government expects continued support from friendly countries, China in particular, over repayment of $3.7 billion in principal debt, maturing in next two months.

A deal with the IMF, meanwhile, continues to elude Pakistan with the global lender hardening its conditions for the release of a $1.1 billion tranche out of a $6.5 billion bailout package. So much so that the negotiations surrounding the ninth review – meant for reaching a staff-level agreement – have nearly outlasted the current fiscal year. The agreement has been delayed since November 2022, with nearly 100 days gone since the last staff-level mission had visited Pakistan. That is the longest such gap since at least 2008.

Pakistan may well do without the IMF support during the rest of the ongoing fiscal year, but how far the government can expect a bailout from friendly countries in the coming fiscal year which will begin with a huge requirement of dollars. According to reports, the country needs $8 billion in fresh loans over the next seven months to cater to the external debt repayments. And this is where the role of the IMF cannot be just trivialised. With the federal budget 2023-24 scheduled to be unveiled on June 9, the gaps in financing have to be worked out well before that. The talks with the IMF would thus continue.

Published in The Express Tribune, May 15^th, 2023.

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