Crucial IMF Meeting For Revival Of Bailout Package Today.

The executive board of the International Monetary Fund (IMF) is all set to meet today (Monday) to consider the loan plan for Pakistan, while authorities of the cash-strapped nation expect the resumption of the month-long stalled $6 billion bailout programme.

However, a rally in the nation's assets may fizzle out amid escalating political tensions.

Pakistan also made a request to the Fund's Board to augment the Extended Fund Facility (EFF) from $6 billion to $7 billion and jack up the timeframe from September 2022 to June 2023.

A recent letter written by KP's finance minister to federal minister for finance might create an embarrassing situation for Pakistan during the IMF's Board meeting but official circles are confident that the Board will not take up this issue. However, there is an apprehension that India's representative might make efforts to highlight this issue at the meeting to embarrass Pakistan's representative.

According to Columbia Threadneedle Investments, Tellimer Limited and Natixis SA predictions, Pakistan will win a loan approval from the IMF board when it meets on Monday, 'paving the way for the release of $1.2 billion in immediate funds.'

However, amid ongoing political turmoil in the country, it is expected that the two-day later focus will shift to PTI Chairperson Imran Khan's court hearing as he battles a string of legal troubles.

'I do think the bulk of the market rally is already in the price,' said Eng Tat Low, an emerging-market sovereign analyst at Columbia Threadneedle in Singapore. 'I expect the next 12 months to be challenging with the general elections looming. The risk of worsening political backdrop is definitely still considerable and elevated, and is a risk that is unlikely to dissipate anytime soon.'

It should be noted that Pakistan's dollar bonds have been the top performers in emerging markets in August after Belarus. Meanwhile, the rupee also soared above its peers as investors cheer the prospect of IMF funds.

However, the development on the political front can put fragile financial stability at risk as supporters of Imran Khan stage protests. 'The political uncertainties will persist with speculations on early elections,' said Junyu Tan, an economist at Natixis in Singapore. 'This will pose a major risk for Pakistani assets.'

Pakistan's dollar bonds mixed performance highlights the country's 'rocky path ahead'. Notes due in December were indicated at about 94 cents on the dollar on Friday from a low...