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IMF Warns of Potential Loan Default by Pakistan, Urges Immediate Action

IMF Warns of Potential Loan Default by Pakistan, Urges Immediate Action

According to a recent report, the IMF has expressed serious concerns about Pakistan's ability to repay its debts, citing significant risks such as delayed reforms, high public debt, and low reserves. The report emphasizes the importance of strong policy implementation and external financing to restore Pakistan's repayment capacity. It also highlights geopolitical instability and global financial uncertainty as additional risks.

Over the next five years, Pakistan needs around USD 123 billion in gross financing, with specific amounts expected to be sought annually. The IMF support team, currently in Pakistan for talks, will discuss a new long-term loan program, with discussions focusing on upcoming budget plans.

Pakistan has requested a bailout package of USD 6 to 8 billion under the Extended Fund Facility (EFF), with potential augmentation through climate financing. To bridge the financing gap, Pakistan plans to rollover around USD 12 billion in debt from key allies like China. Additionally, financial support is expected from Saudi Arabia, the UAE, and international institutions such as the IMF, World Bank, and Asian Development Bank.

Negotiations for the new loan program with the IMF are set to begin in mid-May, preceding the budget presentation in June. Despite narrowly avoiding default last year and stabilizing the economy, Pakistan still faces challenges such as a high fiscal shortfall and stagnating growth.

Inflation has decreased from its peak last year, but the economy is projected to grow at around 2 percent this year, a modest improvement from negative growth in the previous year. Overall, the report underscores the urgency for Pakistan to implement reforms and secure external financing to address its debt repayment challenges and ensure economic stability.

 
 
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IMF Warns of Potential Loan Default by Pakistan, Urges Immediate Action

IMF Warns of Potential Loan Default by Pakistan, Urges Immediate Action

According to a recent report, the IMF has expressed serious concerns about Pakistan's ability to repay its debts, citing significant risks such as delayed reforms, high public debt, and low reserves. The report emphasizes the importance of strong policy implementation and external financing to restore Pakistan's repayment capacity. It also highlights geopolitical instability and global financial uncertainty as additional risks.

Over the next five years, Pakistan needs around USD 123 billion in gross financing, with specific amounts expected to be sought annually. The IMF support team, currently in Pakistan for talks, will discuss a new long-term loan program, with discussions focusing on upcoming budget plans.

Pakistan has requested a bailout package of USD 6 to 8 billion under the Extended Fund Facility (EFF), with potential augmentation through climate financing. To bridge the financing gap, Pakistan plans to rollover around USD 12 billion in debt from key allies like China. Additionally, financial support is expected from Saudi Arabia, the UAE, and international institutions such as the IMF, World Bank, and Asian Development Bank.

Negotiations for the new loan program with the IMF are set to begin in mid-May, preceding the budget presentation in June. Despite narrowly avoiding default last year and stabilizing the economy, Pakistan still faces challenges such as a high fiscal shortfall and stagnating growth.

Inflation has decreased from its peak last year, but the economy is projected to grow at around 2 percent this year, a modest improvement from negative growth in the previous year. Overall, the report underscores the urgency for Pakistan to implement reforms and secure external financing to address its debt repayment challenges and ensure economic stability.

 
 
 

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