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Pakistan faces default risk without IMF loan: Moody’s

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  • 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 programmePakistan 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.”

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Changes in the US dollar’s value are directly correlated with variations in gold prices.

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The price of 24-karat gold in Pakistan increased by Rs1500 on Thursday, reaching Rs231,000 per tola. This was another jump in the price of gold in the country.

Dealers reported a comparable surge in the price of 10 grams of 24-karat gold, which is currently trading at Rs198,045 after rising by Rs1285. In addition, the cost of ten grams of 22-karat gold increased significantly, trading at Rs 181,541.

These fluctuations are strongly correlated with shifts in the US dollar’s value, demonstrating the tight connection between gold prices and exchange rates. This emphasizes how local gold markets are impacted by variables related to the global economy.

At Rs2,580, the price of 24-karat silver remains steady right now. The price of gold increased significantly on a global scale as well, rising by $14 to $2,214 per ounce.

It’s critical to understand that changes in the worldwide market can have a substantial impact on gold prices in Pakistan throughout the day. The gold rates that are offered are obtained from reliable sources, mostly situated in Karachi and Multan.

It is recommended that individuals seek the advice of nearby gold merchants and jewellers for the most precise and current information regarding gold prices.

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Pakistan pledged to finish building the TAPI gas pipeline.

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The minister discussed the importance of the TAPI gas pipeline project for Pakistan’s energy needs during a meeting with Turkmenistan’s ambassador to Pakistan, Atadjan Movlamov.

The Minister was congratulated by Ambassador Movlamov on taking office and his commitment to the project was noted.

Dr. Musadik Malik thanked the ambassador for his kind words, acknowledged the support, and promised to maintain the two nations’ friendship. The intergovernmental commission and working group meetings for the project this year were briefed by Atadjan Movlamov.

He invited the Minister to attend the Turkmenistan Energy Forum, which would take place in Paris the following month.

TAPI undertaking
The project is for the construction of a 1,680-kilometer pipeline with a 56-inch diameter that can carry 3.2 billion cubic feet of gas per day (bcfd) from Turkmenistan through Afghanistan and Pakistan to the border between Pakistan and India.

According to the terms of the TAPI agreement, Afghanistan would receive its portion of 0.5 billion cubic feet of gas per day, while Pakistan and India will each receive 1.325 billion cubic feet of gas per day.

In order to carry out the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project, Pakistan and Turkmenistan inked a cooperative implementation plan in Islamabad on June 4.

Prime Minister Shehbaz Sharif and a delegation from Turkmenistan, led by Minister of Energy and Water Resources Daler Juma’a, were present at the ceremony.

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The price of gold is still rising in Pakistan.

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According to the All Sindh Sarafa Jewellers Association, the cost of 10 grams of 24 karat gold grew by Rs. 86 to Rs. 196,760 from Rs. 196,674, while the cost of 10 grams of 22 carat gold jumped to Rs. 180,363 from Rs. 180,284.

The price of silver per tola and ten grams stayed at Rs. 2,211.93 and Rs. 2,580, respectively.

According to the Association, the price of gold on the global market rose by $7 to $2,200 from $.2,193.

It is important to note that Pakistani and IMF personnel have agreed at the staff level on the second and final review conducted as part of Pakistan’s Stand-By arrangement.

The International Monetary Fund (IMF) and Pakistan have reached a staff-level agreement on the second and final review of Pakistan’s stabilization program, which is supported by the IMF’s US$3 billion (SDR2,250 million) SBA Agreement. This is according to the official statement released by a team led by Nathan Porter.

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