Pakistan will have no choice but to suspend debt repayments if it fails to secure a $1.1 billion bailout from the International Monetary Fund (IMF) at the earliest, reported Bloomberg.
Bank of America economist Kathleen Oh and others said, “Unless the payout comes through soon, a state of moratorium looks unavoidable. Whether and when Pakistan can receive the next installment from the IMF is still up in the air”.
The Bank of America said in a statement, “China holds the key for relief in the near term as it is the largest creditor. With closer ties between China and Pakistan, the hope is rising for China to come on board to provide a backstop to its long-time ally”.
It bears mentioning that in order to unlock funding from its stalled $6.5 billion loan program, Pakistan has undertaken an array of policy measures including increased taxes, higher energy prices, and raising interest rates to woo the IMF. Finance Secretary Hamed Yaqoob Sheikh said last week that an agreement was likely in the coming days, though Pakistan has previously missed such deadlines.
According to central bank Governor Jameel Ahmad, the country needs to repay about $3 billion in debt by June, with another $4 billion expected to be rolled over. An earlier loan rollover from the Industrial and Commercial Bank of China helped to relieve pressure on Pakistan, whose reserves are only enough to cover a few weeks of imports.
Meanwhile, government officials leading the IMF-Pakistan talks, particularly Finance Minister Ishaq Dar and Minister of State for Finance and Revenue Aisha Ghaus Pasha, have reiterated hope that the staff-level agreement for the bailout release will be signed soon.
Currently, Pakistan needs to give assurances in advance that its balance of payments deficit is fully financed for the remainder of its program with the IMF. The lender’s Resident Representative Esther Perez Ruiz told Reuters last week that external financing is one of the final steps the lender wants Pakistan to take before clearing funding that has been stalled since late last year.
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