Karachi: Months after downgrading Pakistan’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CCC-’ from ‘CCC+’, Fitch Ratings revealed that risks are large and default or debt restructuring is an increasingly real possibility for country.

“Our base case is still that Pakistan and IMF will reach an agreement on programme review,” Bloomberg reported citing Hong Kong-based director at Fitch, Krisjanis Krustins. Krustins revealed that cash-strapped Pakistan is bound to repay total of $ 3.7 billion of debt payments in May-June period as government struggles to secure bailout from International Monetary Fund.

Director said about $ 700 million of maturities are due in May and another $ 3 billion in June. Fitch told Bloomberg that it expects $ 2.4 billion of deposits and loans from China will be rolled over.

Pakistan, which has been negotiating to restart $ 6.5 billion bailout with IMF for about half year, is racing to avert default as foreign exchange reserves which currently provide an import cover of nearly one month come under pressure.  Country is reeling from an economic crisis with inflation surging to 36.4 percent, highest in its history and highest in South Asia, while bruising political battle is raging between government and former Prime Minister Imran Khan. Government has removed caps on exchange rate, imposed taxes, raised energy tariffs and scaled back subsidies in an attempt to unlock IMF funding. It has also raised key interest rates to record 21 percent.

Published in The Daily National Courier, May, 06 2023

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