Islamabad, 11 May

The IMF has said that Pakistan faces major debt-repayment challenges and expressed serious doubts over the cash-strapped country's capacity to repay the global lender, according to a media report on Saturday.

The Washington-based bank's assessment of Pakistan's economy came as an IMF support team reached the country on Friday to hold talks with officials here after Islamabad requested a fresh bailout package under the Extended Fund Facility (EFF).

“Pakistan’s capacity to repay the fund is subject to significant risks and remains critically dependent on policy implementation and timely external financing,” Geo News cited the Washington-based lender as saying in its staff report issued earlier this month on Pakistan.

“Exceptionally high risks — notably from delayed adoption of reforms, high public debt and gross financing needs, low gross reserves and the State Bank of Pakistan's (SBP) net FX derivative position, a decline in inflows, and sociopolitical factors — could jeopardise policy implementation and erode repayment capacity and debt sustainability," read the report.

It further said that restoring external viability was critical to ensure Pakistan’s capacity to repay the fund, and hinges on strong policy implementation, including, but not limited to, external asset accumulation and exchange rate flexibility.

Geopolitical instability is an additional source of risk even as uncertainty surrounding global financial conditions has declined somewhat since the last review, it added.

The global lender noted that the country needed gross financing worth USD 123 billion during the next five years, adding that Pakistan was expected to seek USD 21 billion in fiscal year 2024-25 and USD 23 billion in 2025-26.

The report further said the crisis-hit country was expected to seek USD 22 billion in 2026-27, USD 29 billion in 2027-28, and USD 28 billion in 2028-29.