May 11th 2024.
According to a recent media report, the IMF has expressed concerns about Pakistan's ability to manage its debt and repay the global lender. The Washington-based bank's assessment came as a team from the IMF arrived in the country to discuss a potential bailout package. The IMF report stated that Pakistan's ability to repay the fund is subject to significant risks and is heavily reliant on policy implementation and external financing.
The report highlighted that there are several potential risks that could jeopardize Pakistan's repayment capacity and debt sustainability. These include delayed adoption of reforms, high levels of public debt, low foreign reserves, and geopolitical instability. The IMF emphasized the importance of external viability for Pakistan's ability to repay the fund and stated that strong policy implementation, including measures such as external asset accumulation and exchange rate flexibility, is crucial.
The IMF also noted that Pakistan will require significant external financing in the next five years, with an estimated amount of $123 billion. The country is expected to seek financial assistance from the IMF in the fiscal years 2024-25 and 2025-26, with an additional $22 billion in 2026-27, $29 billion in 2027-28, and $28 billion in 2028-29. This highlights the urgent need for Pakistan to address its financial and economic challenges.
In light of these developments, a team from the IMF has arrived in Pakistan to discuss the first phase of a potential long-term loan program. The team will be in the country for over 10 days, during which they will hold discussions with government officials and review data from different departments. The upcoming budget for the fiscal year 2025 will also be a key topic of discussion.
Meanwhile, Pakistan has decided to seek a rollover of approximately $12 billion in debt from key allies such as China in the 2024-25 fiscal year. This is to bridge a significant gap of $23 billion in external financing. The government aims to achieve budget targets before the expected arrival of the IMF team, and negotiations for a new loan program are expected to begin in mid-May.
The Finance Ministry sources have revealed that Pakistan will also receive financial assistance from other institutions, including the World Bank and Asian Development Bank. The federal government is determined to achieve its budget targets and stabilize the economy, which has already shown signs of improvement with a decrease in inflation and controlled external account deficit.
Overall, the IMF's assessment highlights the challenges that Pakistan is currently facing and the urgent need for policy implementation and external financing. The country must work towards achieving financial stability and sustainability to ensure its ability to repay the IMF and other lenders.
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