WASHINGTON: The International Monetary Fund (IMF) on Wednesday said that Pakistan’s external debt has swelled to $100 billion, warning the nation could well become the next country to restructure its debt if it doesn’t hit bailout programme goals.
Quoting an IMF report published on July 18, Bloomberg reported that risks to debt sustainability have become more pronounced due to the scarcity of international financing and large funding needs.
Pakistan finally secured a $3 billion loan with the multilateral lender last week after months of delay, helping it avoid a sovereign default for now.
The global lender – in its report – stated the South Asian nation needs to stick to IMF programme goals to make sure debt is sustainable given the overall risk of sovereign stress is high.
“Any further downward revisions to the baseline could push debt towards unsustainability,” as reported by Bloomberg.
Pakistan’s top finance managers have twice talked about restructuring bilateral debt without giving details in the past year but didn’t follow through due to a lack of consensus.
In the latest instance, Finance Minister Ishaq Dar made an announcement last month but the central bank denied such a move was needed or that any talks were planned, it noted.
The South Asian country’s external debt has increased from $85 billion at the start of the previous program in 2019 due to low revenue and high debt payments.
Pakistan has increased tax revenues and energy prices to meet IMF demands but it has not been able to make progress on long-term structural issues such as privatizing state-owned enterprises.
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The IMF also said Pakistan’s central bank will need to continue its tightening cycle given inflationary pressures are expected to persist over the coming year.
The IMF executive board approved the bailout loan program of $3 billion this week after months of delay, boosting Pakistan’s financial stability ahead of elections this year. Fitch Ratings upgraded Pakistan this week on the improving funding environment.
Read More: IMF loan helps Pakistan unlock another $5.6 billion in funding
Later, State Bank of Pakistan (SBP) received $1.2 billion from the International Monetary Fund (IMF) as the first tranche of a $3 billion bailout to stabilise the economy.
Finance Minister Ishaq Dar – in a televised statement – said the remaining $1.8 would be released after two reviews, meaning that there would be two instalments.
Pakistan’s foreign reserves had jumped by $4.2 billion during the last four days, he said – in a reference to $2bn deposit made by Saudi Arabia and another $1bn received from the United Arab Emirates (UAE).
The foreign exchange reserves held by the SBP rose to $8.4 billion. Dar said: “Our foreign exchange reserves will close at around $13-$14 billion on July 14”.
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