Pakistan may default on external payments if it fails to restart a loan programme with the International Monetary Fund (IMF) that has been stalled since last year due to the South Asian country’s economic crisis, warns Moody.
Moody, a rating agency, issued the warning as Pakistan rushes to complete the ninth review in order to secure $1.2 billion from the IMF.
“We consider that Pakistan will meet its external payments for the remainder of this fiscal year ending in June,” Grace Lim, a sovereign analyst with the rating company in Singapore, was quoted as saying in a Bloomberg report.
“However, Pakistan’s financing options beyond June are highly uncertain. Without an IMF programme, Pakistan could default given its very weak reserves,” the analyst said.
The foreign exchange reserves have dropped to critical levels while talks with the IMF for the release of the ninth tranche are still unsuccessful.
The foreign exchange reserves held by the State Bank of Pakistan (SBP) stood at $4.457 billion as of April 28, 2023.
Meanwhile, consumer prices witnessed an increase in the outgoing week due to a surge in rates of wheat flour, chicken, potatoes, pulses, and powdered milk, taking the weekly inflation to 48.35% on an annual basis.
Also read: IMF tranche reflects improvement in Pakistan’s governance strength: Moody’s
Moody’s Investors Service, often referred to as Moody’s, is the bond credit rating business of Moody’s Corporation, representing the company’s traditional line of business and its historical name. Moody’s Investors Service provides international financial research on bonds issued by commercial and government entities.
Moody’s, along with Standard & Poor’s and Fitch Group, is considered one of the Big Three credit rating agencies. It is also included in the Fortune 500 list of 2021.
The company ranks the creditworthiness of borrowers using a standardized ratings scale which measures expected investor loss in the event of default. Moody’s Investors Service rates debt securities in several bond market segments.
These include government, municipal and corporate bonds; managed investments such as money market funds and fixed-income funds; financial institutions including banks and non-bank finance companies; and asset classes in structured finance.
