July 27, 2022 (MLN): Pakistan is expected to secure $1.2 billion from the International Monetary Fund (IMF), according to Fitch Ratings and Moody’s Investor Service, which may help ease pressure on the nation’s currency and bonds, Bloomberg reported on Wednesday.
“We assume IMF board approval of Pakistan’s new staff-level agreement” with the lender, said Krisjanis Krustins, a Hong Kong-based director at Fitch. “This will unlock significant additional financing from the IMF and other multilateral and bilateral sources and may well provide a significant confidence boost to the markets.”
Pakistan’s currency and bonds have been hammered this month as the specter of political uncertainty delaying IMF support for the nation unnerves investors, it added.
The nation is striving to stave off fears it will follow Sri Lanka into default this year, with the government working to secure billions of dollars from the Washington-based lender and countries like China and Saudi Arabia, it noted.
Moody’s expects IMF to disburse the funds in the third quarter, said Grace Lim, a sovereign analyst with the rating company in Singapore. Still, the risk that Pakistan may not complete its bailout program with the IMF is on the downside as the government may find it difficult to adopt measures to raise revenue, she said.
“Pakistan’s ability to complete the current program and maintain a credible policy path that supports further financing remains highly uncertain, while elevated inflation and a higher cost of living are adding to social and political risks,” Lim said.
The IMF is seeking assurance Saudi Arabia and other nations will follow through with their funding commitments before approving the loan to Pakistan, Bloomberg further highlighted.
Fitch Ratings downgraded the outlook on Pakistan’s credit rating to negative last week, while Moody’s also lowered its outlook in June.
