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Pakistan is likely to avoid default in the following six months, but its problems are far from over, Bloomberg Economics said in a report on Monday.
Ankur Shukla, who covers South Asia at Bloomberg, stated that help from the International Monetary Fund (IMF) will help the country through the end of June.
The report continued, arguing that Pakistan needs more foreign aid, “but investors are now concerned about a major dollar debt due in April 2024, and are pricing those bonds at a distressed level.”
Reports claim that the bond is currently trading at a 46% discount.
“Pakistan now has $5.6 billion in foreign exchange reserves, enough to cover the next five months of funding needs. External aid should boost the number to $14.9 billion. This should cover dollar payments only through March 2024 — leaving the April bond repayment in question,” the report added.
Amidst rapidly diminishing foreign exchange reserves, a falling rupee, and deteriorating macroeconomic indicators, Pakistan is currently experiencing severe economic turmoil. The State Bank of Pakistan (SBP) will likely report reduced foreign exchange reserves this week as a result of the $1 billion in repayments it made over the weekend.
The IMF could still refuse to release the final $2.6 billion in loan tranches, according to the Bloomberg article.
“But we think this is unlikely given the country’s desperate need in the wake of last summer’s floods.”
Experts have said that resumption of the IMF program, which remains stalled, is crucial for the country. The IMF funding is also necessary to unlock $5 billion in financing expected from creditor nations and $1.7 billion in aid from the World Bank.
The Geneva conference, currently underway, is being co-hosted by the Pakistan government and the United Nations, urging countries, organizations and businesses to step up with financial and other support towards a long-term recovery and resilience plan to climate change that saw the country saw disastrous floods last year.
