Govt may use reserves to repay debt

Moody’s Ratings has projected that Pakistan will draw its foreign exchange reserves to repay the maturing foreign debt, which will keep near-term default risks high. “Argentina, Pakistan and Tunisia have large market debt repayments over the next two years compared to their foreign exchange reserves. Barring new or additional foreign currency financing from development partners, these sovereigns will likely use their foreign exchange reserves to repay debt. This will reduce their foreign exchange liquidity buffers and keep near-term default risks high,” the global rating agency said in a report published earlier this week. The agency added that the significantly large interest payments would leave almost no fiscal space with the government to absorb any shocks. It noted that the Pakistani government was actively engaged with the International Monetary Fund (IMF) to secure a new loan programme after the standby arrangement of $3 billion concluded in April 2024.