Pakistan to dodge default in next six months

January 09, 2023 (MLN): Pakistan needs International Monetary Fund (IMF) help to dodge default risk in the next six months, but still many problems hovering around the country, according to the report by Bloomberg.

The International Monetary Fund's help is enough to get the country through the end of June. But investors are now worried about a big dollar debt repayment due in April 2024 and are pricing those bonds at a distressed level, it added.

This means Pakistan needs more external aid.

The IMF could still withhold remaining loan tranches totaling $2.6 billion, but this is unlikely given the country's desperate need in the wake of last summer's floods.

Furthermore, the IMF money is needed to unlock $5bn in financing expected from creditor nations and $1.7bn in aid from the World Bank.

These funds will help cover $5.9bn in debt payments and estimated account deficits through the end of the fiscal year ending in June - and, again these funds will materialize, the report read.

But the question now is how Pakistan will get through the 12 months after that when its dollar financing needs will total at least $11bn.

This includes an estimated current account deficit of $8.8bn and $2.2 billion in external debt repayments, among these a $1bn bond maturing in April 2024. (The figures assume loans with bilateral creditors and international financial institutions rollover).

The report further stated that Pakistan now has $5.6bn in foreign exchange reserves, enough to cover the next five months of funding needs. External aid should boost the number to $14.9bn.

This should cover dollar payments only through March 2024- leaving the April bond repayment in question, it noted.

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