Rating agencies expect Pakistan to receive $1.2 billion from IMF

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Pakistan is expected to get $1.2 billion from the International Monetary Fund, which could help ease pressure on the country’s currency and bonds, according to Fitch Ratings and Moody’s Investor Service.

“We assume that the IMF board approves Pakistan’s new staff-level agreement with the lender,” said Hong Kong-based Fitch director Krisjanis Krustins. “This will unlock significant additional funding from the IMF and other multilateral and bilateral sources and may well provide a significant boost to market confidence.”

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Pakistan’s currency and bonds have been hammered this month as the specter of political uncertainty delaying IMF support for the nation unnerves investors.

The nation is scrambling to stave off fears it could trail Sri Lanka into default this year as the government scrambles to secure billions of dollars from the Washington-based lender and countries including China and Saudi Arabia.

Moody’s expects the IMF to disburse the funds in the third quarter, said Grace Lim, sovereign analyst at the ratings firm in Singapore. Still, the risk that Pakistan will not complete its bailout program with the IMF is on the decline as the government could struggle to pass measures to boost revenue, she said.

“Pakistan’s ability to complete the current program and maintain a credible policy trajectory that supports additional financing remains highly uncertain, while high inflation and a higher cost of living add to social and political risks,” Lim said.

Meanwhile, Prime Minister Shehbaz Sharif’s government faces other distractions. Pakistan’s top court has overturned an election that placed the ruling national alliance candidate as chief minister of the country’s largest province, giving opposition lawmakers led by the former Prime Minister Imran Khan to renew calls for early elections.

Dollar bonds due 2031 were shown down 0.4 cents at 50.67 against the dollar, while the rupee slid to a new high, falling 1.5% to 236.34 against the greenback .

The IMF is seeking assurances that Saudi Arabia and other countries will meet their funding commitments before approving the loan to Pakistan, according to people familiar with the matter.

Fitch Ratings lowered Pakistan’s credit rating outlook to negative last week, while Moody’s also lowered its outlook in June.

“The IMF loan is a high probability event,” said Carl Wong, head of fixed income at Avenue Asset Management in Hong Kong. “But the odds that Pakistan can get away with it are 50/50, because the IMF is only part of the equation.”

Read more: IMF agrees to resume Pakistan’s $1bn loan after taxes and fuel hikes

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