Former Central Bank Governor Warns of IMF's Debt Dilemma Following Pakistan's Election

Pakistan's former central bank governor has expressed concern over the IMF's impending decision regarding the country's fiscal future post-elections.

After obtaining a $3 billion IMF loan in July that saved it from potential default, Pakistan remains on shaky financial ground with the loan term ending this spring.

The IMF has previously stated that Pakistan's debt is sustainable, albeit with significant risks. According to ex-governor Reza Baqir, the IMF must determine if Pakistan's debt remains sustainable or if debt restructuring will be necessary.

By the end of September 2023, Pakistan's public external debt neared $100 billion, with China as its main creditor. Some of Pakistan's bonds are trading worryingly low, indicating financial distress, especially after recent tensions with Iran.

Baqir suggests that Pakistan could consider a debt-for-nature swap, echoing recent successful examples in Belize and Ecuador, to mitigate its financial and environmental challenges.