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IMF programme to boost Pakistan external financing: Moody's

Warns of social tensions and weak governance amid stubborn inflation

NEW YORK (Dunya News/Web Desk) – Moody’s – one of the top international rating agencies – has said the new deal reached with the International Monetary Fund (IMF) will improve the chances of obtaining finances for Pakistan while providing reliable sources for the purpose both friendly nations and international financial institutions.

In a latest report on Pakistan’s economy, Moody’s at the same time has feared that persistent Pakistan inflation may lead to social unrest and tensions. Higher taxes and future energy tariff adjustments could hamper economic reforms in the country, it added.

On the other hand, Moody’s is also of the view that lack of electoral mandate is also a threat to effective and sustained implementation of economic reforms – a clear reference to the coalition government led by PML-N’s Shehbaz Sharif.

Read more: Aurangzeb sees IMF-induced macroeconomic stability

Weak governance and social tensions could impact the government’s ability to go ahead with economic reforms, Moody’s said.

Moody’s report coincides with the latest increase in fuel prices announced on Monday after the government went for electricity basic tariff hike to please the IMF by meeting one of the basic conditions for approving a bailout package.

Earlier, the government presented a budget which saw a massive hike income tax for salaried classes and imposition of GST on items like milk, thus propelling the food prices further in country where an overwhelming majority is dealing with an unprecedented cost of living crisis.

The latest comments came after Islamabad secured a staff-level agreement for a $7 billion deal covering a 37-month period, which is subjected to a final approval by the IMF Executive Board.

About foreign reserves, it says the current $9.4bn level isn’t enough to meet the needs, as Pakistan requires around $21bn in 2024-25 and $23bn in 2025-26 through external financing.

Hence, Moody’s says Pakistan is an alarming position with reference to external debt and the next three to five years would be very tough for policy making and execution.

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