Pakistan faces rising default risk without IMF funds

Crisis-hit nation’s reserves barely enough for three weeks of essential imports

ISLAMABAD/LONDON – Pakistan’s full-blown economic turmoil, from its biggest currency devaluation to a rash of emergency spending cuts, offers the clearest sign yet that the nuclear-armed nation faces the risk of a default unless it receives massive support.

Pushed to the brink by 2022’s devastating floods, the South Asian nation has reserves of just US$3.7 billion (S$4.8 billion) remaining, or barely enough for three weeks of essential imports, while hotly contested elections are due by November.

It desperately needs the International Monetary Fund (IMF) to release an overdue tranche of US$1.1 billion, leaving US$1.4 billion remaining in a stalled bailout programme set to end in June.

Although an emergency IMF mission has arrived in Pakistan, there are no guarantees amid a growing number of headaches after November’s suspension of disbursements from the current package, which was topped up to US$7 billion after the floods.

A devaluation of 15 per cent in the Pakistani rupee and a rise last week in fuel prices could help eliminate some key snags .

Yet pressure is building as the bailout programme cannot be extended beyond June, and the elections loom.