Pakistan’s External Financing Needs

KARACHI (Reuters) – Pakistan’s external financing needs will remain significant in the coming year, despite progress in rebuilding its foreign exchange reserves, Fitch Ratings said on Thursday.

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 stated.

> “Securing sufficient external financing remains a challenge, considering large maturities and lenders’ existing exposures,” said the credit ratings agency.

Last month, Pakistan agreed on a $1 billion loan with two Middle Eastern banks at a 6-7% interest rate, its finance minister informed Reuters during the World Economic Forum.

Pakistan’s central bank chief mentioned that 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 lenders, Fitch emphasized that Pakistan must continue implementing structural reforms, including fiscal consolidation and improving the business environment.

Pakistan is undergoing reforms under a $7 billion IMF programme, which is up for its first review later this month. This programme aims to help tackle deep-rooted economic issues, such as large fiscal and current account deficits.

> “Deteriorating external liquidity, for example linked to delays in IMF reviews, could lead to negative action,” stated the rating agency.

Nonetheless, Fitch acknowledged that Pakistan has made strides in rebuilding its foreign exchange reserves, exceeding targets set by the IMF.

Fitch also noted that Pakistan’s economic activity is 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 optimism for an upgrade in the country’s credit rating, currently CCC+ by Fitch and Caa2 by Moody’s, both classified as junk.

> “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.

(This story has been refiled to fix the day of the week to Thursday in paragraph 1)