• Pakistan financing options beyond June are “highly uncertain”: Moody’s
• Rating agency says reserves enough to cover only one month of imports.
• ‘Engagement with IMF beyond June will support additional financing’.

Moody’s Investor Service has warned that without an International Monetary Fund (IMF) programme Pakistan could default as its financing options beyond June are “uncertain”, Bloomberg reported.

“We consider that Pakistan will meet its external payments for the remainder of this fiscal year ending in June,” sovereign analyst with the ratings company in Singapore Grace Lim said.

“However, Pakistan’s financing options beyond June are highly uncertain. Without an IMF programme, Pakistan could default given its very weak reserves.”

Rising political tensions ahead of elections due this year are adding to the risk of a delay in the loan, as former prime minister Imran Khan is showing no signs of backing down against the government.

The coalition government is struggling to revive a $6.5 billion IMF bailout programme, which had stalled after the government failed to meet some loan conditions.

Dollar bonds due in 2031 were indicated at 34.58 cents on the dollar on Tuesday near the lowest since November. The rupee has been trading near a record low.

“An engagement with the IMF beyond June would support additional financing from other multilateral and bilateral partners, which could reduce default risk,” Lim, in an emailed response to questions, said.

It should be noted that Pakistan’s foreign-exchange reserves — which stand at $4.5 billion — remain extremely low and sufficient to cover only about one month of imports, she said.

According to S&P Global Ratings, Pakistan’s gross external financing needs as a proportion of current-account receipts plus usable reserves is estimated to rise to 139.5% in fiscal year 2024 from 133% in 2023.

“We consider the IMF programme to be a foundation for important fiscal policy reforms,” said Andrew Wood, a sovereign analyst at S&P in Singapore. 

“Agreement on the current review cycle could also coalesce more confidence for other bilateral and multilateral lenders to Pakistan.”