Pakistan does not have enough forex: Moody.

ISLAMABAD: Pakistan’s foreign exchange reserves are worth less than two months of goods and services imports, a report by Moody’s said, indicating the failure of the Imran Khan government to resolve the ongoing economic crisis by borrowing from its allies.

The country does not have enough foreign exchange reserves to pay its public and private external debt due over this year, the Moody’s report revealed. “Foreign exchange reserves are low, and gross borrowing requirements are large in Pakistan and Sri Lanka, threatening the ability of these governments to refinance debt and fund deficits affordably,” Moody’s Investors Service said.

Pakistan will need far more dollars than its central bank currently has in its reserves to meet its external financing needs (imports and loan repayments) this year. It will make the country vulnerable on the external front and again push it to a default-like-situation that it had averted in recent months with the help of dollars received from Soudi Arabia . However, Pakistan’s foreign reserves declined owing to persistent current account deficit.

The reserves coverage of imports has also fallen, Moody’s further said. The credit agency noted that Pakistan’s reserves are now worth less than two months of goods and services imports. This shows Pakistan has a large borrowing requirement but tighter global funding conditions may result in higher credit risk for the country whose debt affordability is already very weak.

Since coming to power last August, the biggest challenge for Prime Minister Imran Khan’s government was to avoid a sovereign default by shoring up its depleting foreign exchange reserves. Khan’s last year’s visits to Saudi Arabia and UAE resulted in aid packages from both the countries, which provided it some breathing space.

Pakistan requires $12 billion to meet its external financing needs till June 2019, but it could only get $3 billion from the Saudi government and as much was promised by the UAE. It has so far received $2 billion from Riyadh and the rest of the amount promised by the two countries is said to be arriving this month. Besides, there are also reports that China is likely to provide $2 billion to support Pakistan’s reserves. Given Pakistan’s critical economic condition, experts in Islamabad  believe that an IMF bailout is inevitable.