• Sunday, June 23, 2024

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IMF doubts Pakistan’s repayment capacity

The Washington-based bank’s assessment of Pakistan’s economy came as an IMF support team reached the country on Friday to hold talks with officials

FILE PHOTO: The International Monetary Fund (IMF) logo is seen outside the headquarters building in Washington. (Photo: Reuters)

By: Shajil Kumar

The IMF has said that Pakistan faces major debt-repayment challenges and expressed serious doubts over the cash-strapped country’s capacity to repay the global lender, according to a media report on Saturday.

The Washington-based bank’s assessment of Pakistan’s economy came as an IMF support team reached the country on Friday to hold talks with officials here after Islamabad requested a fresh bailout package under the Extended Fund Facility (EFF).

“Pakistan’s capacity to repay the fund is subject to significant risks and remains critically dependent on policy implementation and timely external financing,” Geo News cited the Washington-based lender as saying in its staff report issued earlier this month on Pakistan.

“Exceptionally high risks — notably from delayed adoption of reforms, high public debt and gross financing needs, low gross reserves and the State Bank of Pakistan’s (SBP) net FX derivative position, a decline in inflows, and sociopolitical factors — could jeopardise policy implementation and erode repayment capacity and debt sustainability,” read the report.

It further said that restoring external viability was critical to ensure Pakistan’s capacity to repay the fund, and hinges on strong policy implementation, including, but not limited to, external asset accumulation and exchange rate flexibility.

Geopolitical instability is an additional source of risk even as uncertainty surrounding global financial conditions has declined somewhat since the last review, it added.

The global lender noted that the country needed gross financing worth $123 billion (£98bn) during the next five years, adding that Pakistan was expected to seek $21bn (£16.77bn) in fiscal year 2024-25 and $23bn (£18.36bn) in 2025-26.

The report further said the crisis-hit country was expected to seek $22bn (£17.57bn) in 2026-27, $29bn (£23.16bn) in 2027-28, and $28bn (£22.36bn) in 2028-29.

According to sources privy to the matter, a support team of the global lender will discuss the first phase of the next long-term loan programme with the country’s financial team.

The sources said the advance party had reached Pakistan for talks while the IMF mission would arrive on May 16.

Pakistan sought the next bailout package in the range of $6 and $8bn (£6.39bn) for the three years under the EEF with the possibility of augmentation through climate financing. (PTI)

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