KARACHI: Moody’s, the credit rating agency, said in a report on Friday that Pakistan’s political turmoil could disrupt its relations with the IMF and disbursement of loan.
It maintains that multilateral funding is crucial for stability of the country’s external liquidity position, a key factor driving its creditworthiness.
Pakistan has been broadly on track to achieve reforms prescribed under its Extended Fund Facility (EFF) with the IMF, successfully completing three reviews and meeting 10 of 21 benchmarks.
A recent statement by the IMF recognised improvement in Pakistan’s economic performance. Successful completion of the fourth review and approval by the IMF’s management board would allow the release of $545 million this month, taking cumulative disbursements under the 36-month, $6.7 billion programme to $2.8bn.
Pending reforms include bolstering revenues by trimming tax concessions, privatising public sector enterprises, which may prove politically difficult, and addressing energy shortages, said the Moody’s statement.
Stronger fiscal performance and external liquidity are correlated with periods of political stability.
Both fiscal balances and the foreign reserve position began improving in 2013, when the Sharif government came to power, in contrast to a widening fiscal deficit through the tenure of the Pakistan Peoples Party (PPP), led by Asif Ali Zardari.
Foreign reserves swung sharply during the previous two governments, said Moody’s statement.
