July 03, 2023 (MLN): Pakistan needs a long-term external financing plan to meet its large financing needs in the next few years, Grace Lim analyst at Moody's Investor Service said to a local news channel.
Grace Lim highlighted that the IMF program will support macroeconomic stability.
However, in the longer term, the government needs to implement reforms including revenue-raising measures, whereas, in the near term economy to remain subdued.
High-interest rates and inflation constrain government spending as well as business investment.
“The approval of the Standby Arrangement (SBA) will moderately improve Government liquidity,” she said.
Moreover, financing from IMF will open up support from other bilateral and multilateral partners.
She stated that the external debt repayment of the country is expected to remain high in FY24 and uncertainty still exists that Pakistan will be able to secure the full amount of $3 billion of IMF financing.
“Revenue-raising measures will be tested as the country goes into elections due in October 2023,” she added.
Furthermore, the long-term external financing plan may come in the form of another IMF program.
Therefore, the decision to join another program may only become clear after the elections.
The negotiations for any future program are expected to take time, even if successful.
Until a new program is agreed upon, Pakistan's ability to secure loans on an ongoing basis over the long term will be severely constrained.
