Moody’s Investors Service has expressed concern that Pakistan’s prospects for securing loans from bilateral and multilateral partners could be severely limited until a new agreement with the International Monetary Fund (IMF) is reached.
The credit firm suggests that the determination of whether Pakistan will engage in another IMF program may only become clear after the elections due in October 2023, emphasizing that any future negotiations would require time without guaranteed success.
Moody has cautioned that Pakistan is unlikely to afford market financing from Eurobonds or commercial banks in the foreseeable future. In fiscal 2023, the government fell significantly short of its target, issuing no Eurobonds and accumulating only Rs521 billion ($2.8 billion) from commercial banks.
Pakistan’s external debt repayment is set to remain high over the next few years, with repayments amounting to about $25 billion due in fiscal 2024. Meanwhile, the foreign exchange reserves remain critically low, at $3.9 billion as of June 2.
Moody expressed concern about Pakistan’s external funding prospects for fiscal 2024 and beyond, emphasizing the lack of certainty around securing the budgeted $2.4 billion from the IMF.
Moody noted that Pakistan’s newly announced fiscal year 2023-24 budget lacks substantial revenue-raising or spending-containment measures to alleviate intense government liquidity pressures. Given the economic stresses, especially those due to severe floods in August 2022, the agency considers the deficit estimates and growth projections optimistic.
Despite the challenges, the budget provides various relief measures for households and businesses. However, the fiscal 2024 tax revenue target of Rs9.2 trillion, marking a 28% increase from an estimated Rs7.2 trillion in fiscal 2023, relies primarily on the assumption of high nominal GDP growth—an assumption Moody’s sees significant downside risks to in the current scenario.