Pakistan Plans $6 Billion IMF Loan to Tackle Mounting Debt: Report

Pakistan is gearing up to secure a new loan of at least $6 billion from the International Monetary Fund (IMF) to address its pressing debt obligations, as reported by Bloomberg News, citing a Pakistani official. The country intends to negotiate an Extended Fund Facility with the IMF, with discussions expected to commence in March or April.

Last summer, Pakistan narrowly avoided default with the assistance of a short-term IMF bailout. However, as the program is set to expire next month, the incoming government will need to navigate negotiations for a long-term arrangement to stabilize the $350-billion economy.

In preparation for the bailout, Pakistan implemented various measures mandated by the IMF, including budget revisions, a rise in the benchmark interest rate, and adjustments in electricity and natural gas tariffs.

As reported by Reuters, both the IMF and Pakistan’s caretaker finance minister have yet to comment on the Bloomberg report.

Fitch, a prominent ratings agency, highlighted Pakistan’s precarious external position, emphasizing that securing financing from multilateral and bilateral partners will be among the most pressing priorities for the incoming government.

According to Fitch, “A new deal is key to the country’s credit profile, and we assume one will be achieved within a few months, but an extended negotiation or failure to secure it would increase external liquidity stress and raise the probability of default.”

The quest for additional funding underscores the significance of addressing Pakistan’s mounting debt burden and ensuring financial stability in the face of economic challenges.

In summary, Pakistan’s pursuit of a substantial IMF loan reflects its proactive approach to managing fiscal responsibilities and averting potential default risks, signaling a critical phase for the country’s economic future.