Islamabad February 12, 2023: More aid delays from the International Monetary Fund have put Pakistan in a nerve racking place. The government was expecting the IMF to decide on loans by Feb. 9, but the lender’s team came and left without an agreement.
Pakistan has been waiting for help since November, when the IMF skipped planned meetings. It’s unclear whether the foot-dragging means aid is in trouble. But time is ticking and Pakistan is moving closer to default.
The IMF said in a statement that considerable progress was made during the talks in Islamabad and said virtual discussions would continue in the coming days to finalize the deal.
Some differences remain between the two sides, the resolution of which fell outside the mandate of the IMF’s visiting team, the Business Recorder cited Pakistan’s finance secretary as saying.
Meanwhile, default risk is rising. Our calculations show a dollar funding gap of $2.8 billion between February and June if the external aid doesn’t arrive.
Pakistan has to repay at least $3 billion of external debt between February and June, according to the State Bank of Pakistan.
The country will likely record a current account deficit of $2.7 billion during this period, according to our estimates.
The total external liabilities — current account deficit and dollar debt repayments — add up to at least $5.7 billion for February-June.
The country’s foreign exchange reserves stood at around $2.9 billion on Feb. 3.
This suggests that without any external aid, Pakistan will likely face a dollar funding gap of at least $2.8 billion. The IMF aid is needed to unlock loans from creditor nations.
