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Bloomberg reported on Monday that Pakistan dollar bonds are anticipated to experience declines as the current IMF bailout program concludes in March 2024.
An analyst specializing in sovereign debt at a global investment company based in the UK expressed cautious optimism, stating that the caretaker government is taking appropriate
measures, but the actual test lies ahead with the formation of a permanent government. The analyst highlighted concerns about Pakistan’s historical compliance with IMF programs.
Investors are adopting a wait-and-see approach until the country elects a new government, with expectations of a potentially improved deal with the IMF in the upcoming months.
A debt market analyst from the UK noted that although Pakistan dollar bonds had a strong start in 2024, volatility is expected to remain high, especially leading up to the elections
scheduled for Thursday, February 8.
Read Also: Pakistan and the International Monetary Fund: 23 IMF Bailouts in 75 Years
Concurrently, a sovereign analyst based in Singapore pointed out that there is still potential for positive outcomes if there is a smooth transition of government and successful
negotiations for a new IMF program. The analyst emphasized the critical role of the IMF’s support in securing access to multilateral and bilateral funds to meet Islamabad’s external
financing requirements in the future.
Dollar-denominated maturities from Pakistan experienced a 9 percent surge in January, making them the best-rated coupons globally. However, this upward trend may pause as the
country heads to the polls to elect a new government.
Read Also: Pakistan dollar bonds: A Promising investment Amidst Economic Reforms
It’s noteworthy that the elections coincide with Pakistan facing $25 billion in external debt payments in the next fiscal year, approximately three times its foreign exchange reserves.
Pakistan also has about $1 billion in dollar-denominated bonds maturing in April 2024. While a default on these maturities has been ruled out by the markets, the payment will
impact Pakistan’s dollar reserves, which stood at around $8.2 billion last month.
A recent survey by Bloomberg indicated that the nation’s financial stability could be at risk unless a new IMF bailout is secured.