Pakistan plans to seek a new loan of at least $6 billion from the International Monetary Fund to help the incoming government repay billions in debt due this year, Bloomberg News reported on Thursday, citing a Pakistani official.
The country will seek to negotiate an Extended Fund Facility with the IMF, the report said, adding that the talks with the global lender were expected to start in March or April.
Pakistan averted default last summer thanks to a short term International Monetary Fund bailout, but the programme expires next month and a new government will have to negotiate a long-term arrangement to keep the $350-billion economy stable.
Ahead of the bailout, the South Asian nation had to undertake a slew of measures demanded by the IMF, including revising its budget, a hike in its benchmark interest rate, and increases in electricity and natural gas prices.
The IMF did not immediately respond to a Reuters' request for comment on the Bloomberg report. Pakistan's finance ministry could not be immediately reached for comment.
Pakistan faces $25 billion of external debt payments in the fiscal year starting July, about three times its foreign-exchange reserves. The EFF loans are typically approved for three to four years to support policies to fix structural imbalances and are repaid after 4.5 to 12 years.
Investors have been watching the post-election developments closely, concerned that political uncertainty would hinder the nation’s ability to secure more funding, thereby increasing the risk of a debt default. Fitch Ratings Ltd. said this week that failure to procure the loan would “increase external liquidity stress and raise the probability of default.”
Sharif, who was prime minister from 2022 until last year, had success previously in negotiating funding with the IMF. He helped obtain a nine-month, $3 billion loan under the fund’s Stand-By Arrangement in June. Pakistan has a final review under that loan program, which could unlock about $1.1 billion in funding before the facility expires in April. The nation has to repay a $1 billion dollar bond in April.
For a new loan program, the incoming administration would need to make a formal request to the IMF after it takes office. The amount of funding would depend on subsequent talks with the lender.
