IMF Debt Dilemma Looms After Elections Next Month: Ex-Governor SBP

Former Governor State Bank of Pakistan (SBP) Dr. Reza Baqir has warned that the International Monetary Fund (IMF) has to decide on how to deal with Pakistan following the General Elections next month and how to assess the country’s debt, Reuters reported on Thursday. The former central bank governor, who now works as Head of Sovereign Advisory Services at Alvarez & Marsal, said the IMF will have to decide whether or not to pull the plug on Pakistan, which includes reassessing its debt sustainability profile. Dr. Baqir remarked that while the lender has classified Pakistan’s debt profile as sustainable, it has also pointed out the risks. He added that Pakistan may be a contender for a ‘debt-for-nature’ debt swap, recalling how the flash floods of 2022 wreaked havoc and impacted over 33 million people in the country. More on debt-for-nature swaps, another Alvarez & Marshal official said that countries who go through such a program get access to such types of transactions which essentially help reduce their debt stock. Currently run by a caretaker setup, Pakistan last year received a $3 billion bailout plan from the IMF which saved it from a sovereign debt default. On Wednesday, SBP confirmed that it had received the second tranche of $705.6 million from the lender under the same program. The program is set to expire by April 2024. It bears mentioning that per SBP data, the public external debt of Pakistan was just under $100 billion as of September 2023, with China being the country’s largest creditor.