Pakistan faces big external financing risks despite economic progress:Fitch

KARACHI : Pakistan’s external financing needs will remain significant in the coming year, despite progress in rebuilding its foreign exchange reserves, Fitch Ratings said on Tuesday.the South Asian nation needs to repay over $22 billion in external debt in the fiscal year 2025, including nearly $13 billion in bilateral deposits, Fitch said.
“Securing sufficient external financing remains a challenge, considering large maturities and lenders’ existing exposures,” said the credit ratings agency.last month, the country agreed on a $1 billion loan with two Middle Eastern banks at a 6-7% interest rate, its finance minister told Reuters in an interview on the sidelines of the World Economic Forum
Pakistan’s central bank chief earlier said the country aims to raise up to $4 billion from Middle Eastern commercial banks by the next fiscal year.to address its external financing needs from the International Monetary Fund (IMF) and other multilateral and bilateral lenders, Fitch said Pakistan needs to continue implementing structural reforms, including those related to fiscal consolidation and improving its business environment.
Pakistan is undergoing reforms under a $7 billion IMF programme, which is up for its first review later this month. The programme aims to help Pakistan address deep-rooted economic issues such as its large fiscal and current account deficits.”Deteriorating external liquidity, for example linked to delays in IMF reviews, could lead to negative action,” the rating agency said.
Still, Fitch noted that Pakistan has made progress in rebuilding its foreign exchange reserves, outperforming targets set by the IMF.Fitch also said that Pakistan’s economic activity is now benefiting from stability and falling interest rates, expecting “real value added to expand by 3.0% in FY25”.
Pakistan’s finance minister, Muhammad Aurangzeb, expressed hopes for an upgrade in the country’s credit rating, currently at CCC+ by Fitch and Caa2 by Moody’s, both considered “junk” territory.”Ideally, I would like to think that some action in this direction can take place before our fiscal year is over, which is this June,” Aurangzeb told Reuters last month.