Moody's terms IMF bailout crucial for Pakistan.

Byline: Shahbaz Rana

ISLAMABAD -- An International Monetary Fund (IMF) bailout programme is crucial for Pakistan to meet its $30 billion external financing needs, said Moody's Investors Service while casting doubt over the government's plan to restrict the budget deficit to 5.1% of GDP without additional measures.

'An IMF programme will not only bridge the financing gap but will also serve as a strong signal to other official sector creditors that will be crucial to meet financing requirements over coming years,' said Moody's, a credit rating agency, in its country assessment report.

Moody's has estimated Pakistan's gross external financing needs for ongoing fiscal year at around $30 billion, of which around $8 billion are the government's external repayments. The financing gap is likely to be $8 billion to $9 billion, taking into account the government's borrowing plans and Moody's expectations of capital inflows including foreign direct investment and portfolio flows, it added.

These assessments are largely in line with the finance ministry's estimates, which have become the base for approaching the IMF for a bailout package. The Fund's team is coming early next month.

Moody's said a more front-loaded programme would provide greater market confidence when Pakistan's Eurobond and Sukuk repayments totalling $1 billion each are due in April and December 2019.

Moody's has again highlighted high external and fiscal challenges, particularly in light of investments, imports and external borrowing related to projects under the China-Pakistan Economic Corridor (CPEC). But it said the government had pledged a reform-based policy agenda, including raising economic competitiveness through pro-business policies, addressing corruption issues, reforming state-owned enterprises, enforcing greater discipline in government spending and broadening the tax base.

The ratings agency said the programme would be credit-positive for Pakistan because access to a cheap, stable source of external financing would provide immediate support to the government's external financing needs. Additionally, support and technical assistance from the IMF would aid macroeconomic rebalancing and the government's structural reform agenda.

For PTI, walk on tightrope ahead...