Pakistan will dodge default in next six months, but troubles are not over: Bloomberg

Pakistan looks like it will dodge default in the next six months, but its troubles aren’t over IMF help is enough to get the country through the end of June.

But investors are now worried about a big dollar debt repayment due in April 2024. This means Pakistan needs more external aid.

The IMF could still withhold remaining loan tranches but we think this is unlikely given the country’s desperate need in the wake of last summer’s floods.

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The IMF money is needed to unlock $5 billion in financing expected from creditor nations and $1.7 billion in aid from the World Bank.

These funds will help cover $5.9 billion in debt payments and estimated account deficits through the end of the fiscal year ending in June — and, again, we think these funds will materialize.

But the question now is how Pakistan will get through the 12 months after that when its dollar financing needs will total at least $11 billion.

This includes an estimated current account deficit of $8.8 billion and $2.2 billion in external debt repayments, among these a $1 billion dollar bond maturing in April 2024

The market’s risk assessment suggests the country will have to seek more external aid from the IMF and/or other creditors.