According to a report by Bloomberg on Tuesday, the rating agency Moody’s warned that Pakistan risked defaulting if it did not receive bailout assistance from the International Monetary Fund (IMF) because its financing options beyond June were unclear.
According to Grace Lim, a sovereign analyst with the Singapore-based ratings agency, “We believe that Pakistan will make its external payments for the remainder of this fiscal year ending in June.”
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But Pakistan’s financial options after June are very uncertain. Pakistan’s extremely low reserves make default a possibility in the absence of an IMF program.
With the IMF, Pakistan signed a $6.5 billion program in 2019. However, the ninth review of the program for the release of $1.2 billion has been postponed since October of last year because the government has been unable to comply with some of the lender’s requirements.
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In February of this year, an IMF delegation visited Pakistan to hold discussions with the government about reviving the program.
Following the departure of the delegation, Finance Minister Ishaq Dar declared that talks with the lender were “nearly concluded” and that a staff-level agreement would be reached “next week.” However, more than two months have passed since then, and no agreement is in sight.
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The State Bank of Pakistan’s reserves, which were $4.46 billion during the week ending on April 28, were just enough to cover a month’s worth of imports.
Also reaching previously unheard-of heights is inflation. As a result of skyrocketing food prices and rising energy prices, the consumer price index increased by a record 36.4 percent in April from a year earlier.