Bloomberg, a reputable international source of business news, claims that Pakistan may “dodge” default within the next six months, but this won’t put an end to the country’s economic problems because Islamabad still has to worry about a sizable dollar debt that is due in April 2024.
Following a recent risky eight-year low in its foreign exchange reserves, Pakistan is desperately attempting to increase them. Islamabad and the IMF have not spoken about a loan tranche since September of last year.
Due to Pakistan’s impending balance of payments issue, investors and economists are worried that the country may stop making payments. Ishaq Dar, the finance minister, asserts that even though the economy is weak, the government won’t go into default.
In accordance with a study published on Bloomberg Economics, Pakistan can get help from the IMF until June. Nevertheless, the article claims that “investors are now concerned about a huge dollar debt repayment coming in April 2024 and are pricing those bonds at a distressed level.” This suggests Pakistan requires more foreign aid.
According to Bloomberg, the IMF might decide against giving Pakistan loan tranches worth $2.6 billion. However, it was noted that this was unlikely given the fact that the country was in “desperate need” of money due to the consequences of the terrible floods from the previous year.
According to the statement, “The IMF money is necessary to release $5 billion in anticipated financing from creditor nations and $1.7 billion in assistance from the World Bank.”
By the end of the fiscal year, which ends in June, the funds will be adequate to cover the anticipated account deficits and $5.9 billion in debt payments. The following year, when Pakistan’s dollar funding requirements would total at least $11 billion, it was still unclear how Pakistan would survive.
Furthermore, “this includes an estimated $8.8 billion current account deficit and $2.2 billion in repayments of external debt, among them a $1 billion dollar bond expiring in April 2024,” the statement continued.
The report claims that with the aid of outside sources, Pakistan’s foreign exchange reserves will increase to $14.9 billion. The April bond repayment was put in doubt because “this should only cover dollar payments through March 2024.”