Pakistan will have to stop debt repayments without IMF deal: Report
Pakistan will need to stop debt repayments if it isn’t able to secure funding from the International Monetary Fund quickly enough, according to Bank of America.
“Unless the payout comes through soon, a state of moratorium looks unavoidable” economists including Kathleen Oh wrote in a note Friday. “Whether and when Pakistan can receive the next installment from the IMF is still up in the air.”
However, the Bank of America team which prepared the report, also said that China, a close ally, can rescue Pakistan because of its close ties with the country.
A state of moratorium appears inevitable unless the payout comes through soon, according to economist Kathleen Oh, who was quoted by the Bloomberg news agency in its story on the bank’s assessment on Monday.
She pointed out that even after weeks of negotiations, it’s still not clear “whether and when Pakistan can receive the next installment from the IMF.” Pakistan has implemented a series of policy measures including increased taxes, higher energy prices and increasing interest rates to the highest in 25 years to unlock funding from its stalled IMF $7 billion loan program.
On Thursday, Finance Secretary Hamed Yaqoob Sheikh told reporters that an agreement was likely in the next few days, though Pakistan has missed such timelines in the past.
The country needs to repay about $3 billion of debt by June, while $4 billion is expected to be rolled-over, central bank Governor Jameel Ahmad said last week. A loan rollover from Industrial and Commercial Bank of China earlier this month helped to ease pressure on Pakistan, whose reserves are only enough to cover a few weeks of imports.