Lahore
\nThe Ferozepur Road Industrial Association (FRIA) has said that the newly-elected government will have to put in place a long-term financing plan to meet its very large external debt obligations for the next few years, as a timely announcement of the results, leading to a smooth formation of a new government will reduce policy and political uncertainty.
\nThe FRIA senior vice chairman and PIAF EC member Shahbaz Aslam said that this is crucial for the country that is facing very challenging macroeconomic conditions, with fragile balance of payments, weak growth and high inflation. He said that political stability is essential for economic stability. The business community is anxious to improve the economic situation, however, the caretaker government deserves congratulations for holding free and impartial elections.
\nShahbaz Aslam said that the government will need to negotiate for another International Monetary Fund program, after the current one expires in April 2024. Until a new program is agreed to, Pakistan\u2019s ability to secure loans from other bilateral and multilateral partners will be severely constrained.
\nEven under a new IMF program, the new government will be tested on its willingness and ability to implement and sustain reforms, particularly revenue-raising measures, that may be politically unpopular, but required to improve macroeconomic conditions, he added.
\nHe said that Pakistan\u2019s sovereign dollar bonds extended losses to more than 5 cents, data showed on Friday, as both Imran Khan and Nawaz Sharif claimed victory in neck-and-neck results from Thursday\u2019s elections in the debt-laden nation.
\nAll of its sovereign dollar bonds slid, with the September 2025 maturity falling the most, shedding just over 5 cents to trade at 82.4 cents on the dollar.
\nThe FRIA SVC said that possibility of a political stalemate in Pakistan leading to delays in both reforms and crucial foreign funding has sparked a selloff in its international bonds and fuelled analysts\u2019 fears of further economic misery for the country.
\nPakistan is in an economic crisis, with dwindling foreign currency reserves that will be further strained by a $1 billion bond payment due in two months, while its $3 billion funding program with the International Monetary Fund expires on April 12.
\nPakistan will be entering into more severe political and economic instability if no party emerges with a simple majority, he said and added that most important is credibility of elections and legitimacy of the government\u2013any government which lacks credibility will not be able deliver on much needed reforms.
\nSecuring funding will be a top priority, with the country having not yet fully covered its external financing requirements for 2024 and its near $100 billion external debt burden casting a long shadow over the A new government is expected to quickly take the necessary steps for example on governance of state-owned enterprises to complete the last remaining review of the current $3 billion IMF Standby Arrangement\u2013a bridge loan that helped pull the country back from the brink of default.
\nDoing so would secure it a final $1.1 billion tranche before the current IMF program expires in mid-April\u2013with the government then having to secure a follow-up program straightaway.
\nWe expect one of the most immediate policy initiatives taken by the new government will be to negotiate a new IMF Extended Fund Facility program, which typically runs for about 3-4 years, he said.
\nWhile the country\u2019s international bonds make up just 3.4% of its total public debt\u2013dwarfed by the near 13% it owes to China, external debt amortisation is high in percent of FX reserves, according to calculations. China is a major creditor for Pakistan and has in recent times rolled over loans to the country, as have the United Arab Emirates and Saudi Arabia.
\nPolitical fragmentation might make it harder to push through painful and unpopular but necessary measures such as widening the tax base, analysts said.<\/p>\n","protected":false},"excerpt":{"rendered":"
Lahore The Ferozepur Road Industrial Association (FRIA) has said that the newly-elected government will have to put in place a long-term financing plan to meet its very large external debt obligations for the next few years, as a timely announcement of the results, leading to a smooth formation of a new government will reduce policy […]<\/p>\n","protected":false},"author":2,"featured_media":358220,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":{"0":"post-386430","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business"},"yoast_head":"\n