Pakistan Edges Closer to Default as Imran Khan Arrest May Delay IMF Deal: Bloomberg

Pakistan is on the verge of default as political unrest sparked by the arrest of former Prime Minister Imran Khan threatens to derail a billion-dollar bailout from the International Monetary Fund (IMF), reported Bloomberg. Eng Tat Low, an emerging-market sovereign analyst at Columbia Threadneedle Investments in Singapore, said, “It looks increasingly difficult for Pakistan to avoid a default in the absence of fresh funding support coming in. I am also growing more skeptical whether an IMF deal is going to come through. Their heavy debt amortization against precarious reserves would suggest default is imminent”. On Wednesday, dollar bonds maturing in 2031 fell to their lowest level since November 2022, trading at 33.85 cents on the dollar. Following Khan’s arrest, violent protests flared across Pakistan on Tuesday. The turmoil comes as the government deals with the IMF to restart a $6.5 billion bailout program that the country requires to avoid default. According to Columbia Threadneedle, Pakistan’s external debt service for the fiscal year 2024 is expected to be around $22 billion. Moody’s Investor Service said recently that Pakistan could default without an IMF loan bailout because its financing options beyond June are uncertain. Haoxin Mu, an economist at Natixis SA in Hong Kong, noted that it’s a foregone conclusion that the IMF will postpone the bailout because social stability is one of the lender’s requirements. He added that if the situation worsens, the bailout may be postponed until after the elections scheduled for sometime later this year.