New York March 13 2023: Crisis-hit Pakistan will need to pause debt repayments if it isn’t able to secure funding from the International Monetary Fund quickly enough, according to Bank of America.
“Unless the payout comes through soon, a state of moratorium looks unavoidable” economists including Kathleen Oh wrote in a note Friday. “Whether and when Pakistan can receive the next installment from the IMF is still up in the air.”
Pakistan has implemented a series of policy measures including increased taxes, higher energy prices and increasing interest rates to the highest in 25 years to unlock funding from its stalled IMF $6.5 billion loan program. Finance Secretary Hamed Yaqoob Sheikh said Thursday an agreement was likely in the next few days, though Pakistan has missed such timelines in the past.
Pakistan Still Negotiating But Expects IMF Deal in Few Days
The country needs to repay about $3 billion of debt by June, while $4 billion is expected to be rolled-over, central bank Governor Jameel Ahmad said last week. A loan rollover from Industrial and Commercial Bank of China earlier this month helped to ease pressure on Pakistan, whose reserves are only enough to cover a few weeks of imports.
“China holds the key for relief in the near term as it is the largest creditor,” the Bank of America team wrote. “With closer ties between China and Pakistan, the hope is rising for China to come on board to provide a backstop to its long-time ally.”
