Moody’s Investors Service (Moody’s) Monday said that Pakistan’s new deal with the International Monetary Fund (IMF) will support macroeconomic stability.
In a statement, Moody’s said that in the longer term, Pakistan needs to implement reforms including revenue-raising measures, whereas, in the near term the economy will remain subdued.
The statement said that high interest rates and inflation will constrain government spending as well as business investment adding that the approval of the stand-by arrangement (SBA) will moderately improve government liquidity.
It highlighted that the financing from IMF will open up support from other bilateral and multilateral partners. However, Pakistan’s external debt repayment will remain high in the current fiscal year (FY24).
Grace Lim, analyst at Moody’s Investor Service, also said that it is still uncertain that Pakistan will be able to secure full $3 billion financing from IMF.
Questions remain over the government’s revenue-raising measures as the country goes into elections due in October 2023. Pakistan needs a long-term external financing plan to meet its large financing needs in the next few years, it added.
It also said that Pakistan’s ability to secure loans on an ongoing basis over the long term will be severely constrained until a new program with the IMF is agreed. The new program will only be agreed upon after the elections and negotiations in this regard are likely to be lengthy.
On Friday, the International Monetary Fund (IMF) announced reaching a staff-level agreement (SLA) with Pakistan on a $3 billion “stand-by arrangement”.
Pakistan was anticipating the release of the remaining $2.5 billion from a $6.5 billion bailout package that was agreed upon in 2019. However, the package expired on Friday, as the ninth review could not be completed.
