Credit rating agency Moody’s has warned that Pakistan could default on its debt obligations if it does not receive further bailout loans from the International Monetary Fund (IMF). The country is currently in talks with the IMF over a potential $6 billion loan package to help it address its mounting debt crisis.
Moody’s noted that Pakistan’s foreign exchange reserves remain low, while the country’s external financing needs are high due to its large current account deficit. The agency also highlighted Pakistan’s weak economic growth prospects and its reliance on external financing to fund its budget deficit.
The warning from Moody’s comes as Pakistan’s economic situation continues to deteriorate. The country’s economy is projected to contract by 1.5% this year, while inflation has surged to over 9%. The government has also faced criticism over its handling of the COVID-19 pandemic, with the country experiencing a sharp rise in cases and deaths in recent weeks.
In addition to the IMF bailout, Pakistan is also seeking debt relief from its international creditors. The country has already secured some relief under the G20’s Debt Service Suspension Initiative, which allows developing countries to defer debt payments until the end of the year.
Despite these efforts, Moody’s has warned that Pakistan’s debt sustainability remains at risk. The agency noted that the country’s debt-to-GDP ratio is expected to rise to around 90% in the coming years, which could further erode its creditworthiness.
In conclusion, Moody’s warning that Pakistan could default on its debt obligations without further IMF bailout loans highlights the country’s precarious economic situation. While the government is taking steps to address its debt crisis, the road ahead remains challenging, particularly in light of the ongoing COVID-19 pandemic.
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