Washington, 4 July, 2023 (GNP): The two prominent global rating agencies, Fitch and Moody’s have predicted that Pakistan will need more funds than it is currently getting from the International Monetary Fund (IMF) to assist its economy and meet its debt maturities.
A well-known international news agency company reported their warnings on Monday.
The Fitch Ratings and Moody’s Investors Service that issued an alert are two of the three famous credit rating agencies acknowledged by the US Securities and Exchange Commission.
The two agencies stated that Pakistan has to pay back $25 billion in the ongoing fiscal year to meet its debt obligations.
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As per Moody’s, the refund payments include both principal and interest and are equal to seven times Pakistan’s foreign exchange reserves and notably more than the amount of $3 billion primarily approved by the IMF for Pakistan last week.
The director of sovereigns for Asia and the Pacific region at Fitch Krisjanis Krustins said, “Pakistan will require significant additional financing besides the IMF disbursements to meet its debt maturities and finance an economic recovery.”
“While the IMF likely sought and received assurances for such financing, there is a risk that this could prove insufficient, particularly if current account deficits widen again,” he added.
The leading international news agency also stated that the IMF programme has “sent a positive wave through the markets, with stocks surging the most in 15 years on Monday and dollar bonds extending their best run ever.”
The government of Pakistan has increased taxes, raised key interest rates to the highest level, and reduce spending to acquire the financial agreement with the IMF.
An analyst with Moody’s in Singapore Grace Lim exchanged her thoughts with the renowned international news agency and stated, “It is uncertain that the Pakistani government will be able to secure full $3bn of IMF financing during the nine-month Stand-By Arrangement.”
She said that Pakistan’s commitment to continuing the execution of the reforms will be tested when it goes into general elections likely to happen in October.
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Furthermore, Lim expressed that Pakistan had previously settled a $1.1bn loan in August, but the IMF did not release the amount as Islamabad failed to meet some requirements.
“Whether Pakistan will join another IMF programme may only become clear after elections,” she added.
However, the rating agencies also predicted in May that Pakistan might default or possibly do debt reshuffling if it did not strike a deal with the IMF.
