Pakistan will need significantly more funding than it will receive from the International Monetary Fund (IMF) to repay debt and make an economic recovery, the world’s two largest rating agencies have warned.
The warning was issued by Moody’s Investor Service and Fitch Ratings, two of the world’s three largest rating agencies, approved by the U.S. Securities and Exchange Commission.
Both agencies noted that Pakistan has to repay $25 billion in debt in the current financial year, including interest and loan installments, which according to Moody’s is seven times more than Pakistan’s foreign exchange reserves.
Director Fitch for Asia and the Pacific Chris Johns Christens said that this amount is much more than the $3 billion agreement that Pakistan signed with the IMF last week, and the program is also to be approved by the IMF’s executive board.
He said the IMF may have sought assurances about such financing, but feared they could be inadequate, especially if the current account deficit widens again.
Bloomberg, citing these two institutions, reported that the IMF program has sent a positive wave to the markets, on Monday the stock exchange rose the most in 15 years and the value of the rupee continued to strengthen well.
Singapore-based Moody’s analyst Grace Lim said that Pakistan increased taxes for the IMF deal and raised interest rates to historic highs while also reducing spending, it is uncertain that the Pakistani government will get $ 3 billion from the IMF under a nine-month standby arrangement.
In May, Fitch said Pakistan had to pay $700 million in May and another $3 billion in June, with Fitch noting that $2.4 billion of deposits and loans would be rolled over by China.
Rating agencies warned in May that Pakistan could go bankrupt or restructure loans if it did not receive IMF support.