Business

Pakistan faces default risk without IMF loan: Moody’s

Published

2 years ago

Farwa

Pakistan financing options beyond June are “highly uncertain”: Moody’s
Rating agency says reserves enough to cover only one month of imports.
‘Engagement with IMF beyond June will support additional financing’.

Moody’s Investor Service has warned that without an International Monetary Fund (IMF) programme Pakistan could default as its financing options beyond June are “uncertain”, Bloomberg reported.

“We consider that Pakistan will meet its external payments for the remainder of this fiscal year ending in June,” sovereign analyst with the ratings company in Singapore Grace Lim said.

“However, Pakistan’s financing options beyond June are highly uncertain. Without an IMF programme, Pakistan could default given its very weak reserves.”

Rising political tensions ahead of elections due this year are adding to the risk of a delay in the loan, as former prime minister Imran Khan is showing no signs of backing down against the government.

The coalition government is struggling to revive a $6.5 billion IMF bailout programme, which had stalled after the government failed to meet some loan conditions.

Dollar bonds due in 2031 were indicated at 34.58 cents on the dollar on Tuesday near the lowest since November. The rupee has been trading near a record low.

“An engagement with the IMF beyond June would support additional financing from other multilateral and bilateral partners, which could reduce default risk,” Lim, in an emailed response to questions, said.

It should be noted that Pakistan’s foreign-exchange reserves — which stand at $4.5 billion — remain extremely low and sufficient to cover only about one month of imports, she said.

According to S&P Global Ratings, Pakistan’s gross external financing needs as a proportion of current-account receipts plus usable reserves is estimated to rise to 139.5% in fiscal year 2024 from 133% in 2023.

“We consider the IMF programme to be a foundation for important fiscal policy reforms,” said Andrew Wood, a sovereign analyst at S&P in Singapore.

“Agreement on the current review cycle could also coalesce more confidence for other bilateral and multilateral lenders to Pakistan.”

Business

E&P Companies Will Invest $5 Billion in Pakistan’s Petroleum Industry

Published

1 day ago

Farwa

Over the next three years, local and foreign companies involved in Pakistan’s oil and gas exploration and production sector have shown a strong desire to invest more than $5 billion in the nation’s energy sector.

Recent changes to the Petroleum Policy and the implementation of an exclusive tight gas policy, which provide better incentives and a more investor-friendly regulatory framework, are credited with the increase in investor confidence.

These strategic changes are expected to boost domestic energy production, open up new avenues for growth, and draw large amounts of both domestic and foreign investment.

Business

With inflation slowing, the SBP is anticipated to lower the policy rate for the eighth time in a row.

Published

1 day ago

Farwa

Businesspeople anticipate another reduction in the policy rate when the State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) releases the updated rate.

The interest rate for the upcoming two months will be announced by the central bank. It is still unclear if the rate will stay the same or be lowered to reflect stakeholder expectations.

According to experts, the policy rate will be lowered in order to further boost the nation’s economic sector.

Interest rates may be lowered for the seventh time in a row if the inflation rate declines significantly more than anticipated.

In its last six sessions, the MPC had cut the policy rate by 10 percent. In January 2025, it decreased the rate by one percent to 12pc.

12PC POLICY RATE

In January, the State Bank of Pakistan (SBP) announced cut in key policy rate by 100 basis points (bps) to 12 percent from 13pc in line with expectations of the business community.

The policy rate, which had been at 22 percent since June 2024, was slashed by 1,000 basis points to 12 percent.

The SBP governor said the decision was taken with careful consideration. “Although inflation is expected to decline next month (February), core inflation remains a pressing concern,” he stated.

Ahmed highlighted strong remittance inflows and robust export growth as key factors supporting the current account.