Pakistan to face complications in securing IMF deal due to election results: Fitch

Pakistan to face complications in securing IMF deal due to election results: Fitch

Next financing deals from multilateral and bilateral partners will be "one of the most urgent issues on the agenda for the new government".
Pakistan to face complications in securing IMF deal due to election results: Fitch

Web Desk

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19 Feb 2024

Global rating agency Fitch on Monday said cash-strapped Pakistan may face complications in securing the next International Monetary Fund (IMF) deal, which will expire in March, due to the election results and political uncertainty.

"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," Fitch said in a statement.

Fitch said Pakistan met less than half of its $18 billion funding plan in the first two quarters of the fiscal year ending June 2024 (FY24), excluding routine rollovers of bilateral debt.

According to Fitch, the next financing deals from multilateral and bilateral partners will be "one of the most urgent issues on the agenda for the new government".

"Finalising a new IMF deal is likely to be challenging. The current SBA is an interim package and we believe any successor arrangement would come with tougher conditions, which may be resisted by entrenched vested interests in Pakistan," the rating agency said.

Fitch said the political instability in Pakistan could prolong discussions with the US-based global lender, may delay assistance from other multilateral and bilateral partners, or hamper the implementation of reforms.

As per Fitch's report, the new Pakistani government will engage in a discussion with the IMF after assuming office, "but risks to political stability are likely to remain high". 

"Public discontent could rise further if PTI remains sidelined – the election revealed continued strong public support for the party," the statement added.

"We believe Pakistan’s external finances will remain structurally weak until and unless it develops a private sector that can generate greater significantly more export income, attract FDI or reduce import dependence," Fitch concluded.

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