IMF Voices Concern Over Pakistan's Debt Repayment Ability As Support Team Lands In Islamabad

Furthermore, the report emphasised the importance of restoring external viability for Pakistan to uphold its ability to repay the fund.

The International Monetary Fund (IMF) has emphasised that Pakistan is confronting substantial challenges in terms of debt repayment. Furthermore, according to a media report published on Saturday, the IMF has articulated profound reservations regarding the capacity of the financially strained country to fulfil its obligations to the global lender.

The Washington-based bank's evaluation of Pakistan's economy coincided with the arrival of an IMF support team in the country on Friday. The team's objective is to engage in discussions with local officials following Islamabad's request for a new bailout package under the Extended Fund Facility (EFF).

“Pakistan’s capacity to repay the fund is subject to significant risks and remains critically dependent on policy implementation and timely external financing,” reported Geo News, citing IMF as saying in its staff report issued earlier this month.

“Exceptionally high risks — notably from delayed adoption of reforms, high public debt and gross financing needs, low gross reserves and the State Bank of Pakistan's (SBP) net FX derivative position, a decline in inflows, and sociopolitical factors — could jeopardise policy implementation and erode repayment capacity and debt sustainability," read the report.

Furthermore, the report emphasised the importance of restoring external viability for Pakistan to uphold its ability to repay the fund. This relies heavily on robust policy implementation, encompassing external asset accumulation and exchange rate flexibility.

Additionally, the report highlighted geopolitical instability as an additional risk factor. Despite a decrease in uncertainty surrounding global financial conditions compared to the previous review, geopolitical instability remains a significant concern.

According to the global lender's assessment, Pakistan requires gross financing amounting to $123 billion over the next five years. It was highlighted that Pakistan is projected to seek $21 billion in fiscal year 2024-25 and $23 billion in 2025-26. Moreover, the report indicated that the crisis-affected country is anticipated to request $22 billion in 2026-27, $29 billion in 2027-28, and $28 billion in 2028-29.

PTI reported, citing sources, that a global lender support team is scheduled to discuss the initial phase of the upcoming long-term loan program with the country's financial authorities. 

The report further indicated that the advance team has already arrived in Pakistan for negotiations, while the complete IMF mission is expected to arrive on May 16. During their stay, the team will gather data from various departments and discuss with officials from the Ministry of Finance regarding the forthcoming budget for the fiscal year 2025 (FY2025). Additionally, the report states that the team is slated to remain in Pakistan for a period exceeding 10 days. Notably, Pakistan has requested the next bailout package, ranging between $6 billion and $8 billion for three years under the Extended Fund Facility (EEF), with the potential for additional funding through climate financing.