According to American magazine Bloomberg, Pakistan intends to obtain a new loan of at least $6 billion from the International Monetary Fund (IMF) to help pay off the $6 billion due this year. The country had previously avoided default by a short-term bailout from the IMF, but this program is coming to an end next month and the new government will need to negotiate long-term arrangements to stabilize the economy, which could require borrowing up to $350 billion.
Before the bailout, Pakistan had to take multiple steps to meet demands from the IMF, including scrutiny of its budget, increased interest rates, and raising the prices of electricity and natural gas. The IMF’s staff will continue to negotiate with authorities on the need for long-term reforms, with funds available to assist the post-election government in dealing with ongoing challenges in Pakistan.
The country’s Finance Minister has not given an immediate response to Bloomberg’s report. Fitch, a rating agency, has indicated that obtaining financial assistance from multiple sources will be the most immediate issue for the next government in Pakistan, as a weak external position will make it difficult to receive support from many directions and bilateral partners.
A new agreement is key to the country’s credit profile and will be obtained within a few months, but failed negotiations or securing it will increase external liquidity pressures and the possibility of default.