Uncertain political situation in Pak poses threat to IMF deal: Fitch

Global ratings agency Fitch on Monday warned that the "close outcome" of the February 8 polls in Pakistan and the resulting "near-term political uncertainty" may complicate the country's efforts to secure a financing agreement with the IMF

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The US-based Fitch Ratings, one of three leading global rating agencies, said in its report that a new International Monetary Fund (IMF) deal to succeed the Stand-By Arrangement (SBA) expiring in March this year was key to Pakistan's credit profile, the Dawn newspaper reported.

Last month, the cash-strapped country received over USD 700 million in a second tranche from the Washington-based global lender under the existing USD 3 billion SBA agreed upon in June last year, when Pakistan was slowly drifting towards default.

"WWe assume one will be reached within a few months, but an extended negotiation or failure to secure it would increase external liquidity stress and raise the probability of default," the agency said.

The rating agency highligh ed that while Pakistan's external position had improved in recent months, with the State Bank of Pakistan reporting net foreign reserves of USD 8 billion as of February 9, "this is low relative to projected external funding needs" that are expected to exceed reserves for the next few years.

"We estimate Pakistan met less than half of its USD 18 billion funding plan in the first two quarters of the fiscal year ending June 2024 (FY24), excluding routine rollovers of bilateral debt," it said.