The International Monetary Fund (IMF) staff-level agreement between Pakistan and the global rating agency Moody’s on Tuesday was described as “improving funding prospects, but capacity to sustain reforms key to easing liquidity risks.”
The nation received much-needed reprieve on Saturday when the Shehbaz Sharif-led government and the IMF struck an agreement on a $7 billion, three-year aid package, according to the Washington, DC-based organization.
Moody’s stated in a statement on the recent agreement with the IMF that Pakistan’s (Caa3 stable) funding prospects will be enhanced by the new IMF program.
“To meet Pakistan’s external financing needs, the program will catalyze funding from other multilateral and bilateral partners and provide reliable sources of financing from the IMF.”
The government’s capacity to maintain the execution of reforms, the agency said, will be crucial to Pakistan’s ability to continuously release funds during the course of the IMF program and result in a long-lasting reduction of the risks associated with government liquidity.
In terms of the new program’s requirements, Moody’s stated that it “comes with conditions of far-reaching reforms, such as measures to broaden the tax base and remove exemptions and making timely adjustments of energy tariffs to restore the viability of the energy sector.” Additional measures to improve the management and privatization of state-owned entities (SOEs), phase out subsidies and prices for agricultural support, and gradually liberalize trade policy are also included.
But the organization acknowledged that societal unrest brought on by the high cost of living would influence the execution of reforms, particularly in light of potential tax increases and changes to energy prices.
In the statement, it stated that there were still concerns that the coalition government would not have received enough votes to sustainably carry out challenging measures.
For the fiscal year ending in June 2025, the country’s “external financing needs is about $21 billion,” according to an IMF study from May, and for the fiscal year 2026–2027, it is approximately $23 billion.
Foreign reserves kept by the nation at this time “are far below its needs,” according to Moody’s.
According to the agency, Pakistan was prone to “policy slippages,” and the government’s capacity to implement reforms might be hampered by poor governance and high levels of societal unrest.
