Moody’s Investors Service has stated that Pakistan’s recent staff-level agreement with the International Monetary Fund (IMF) enhances the nation’s funding prospects.
However, the global rating agency stressed the necessity of sustained reforms to mitigate liquidity risks.
On 12 July, Pakistani authorities and the IMF reached a staff-level agreement on a 37-month Extended Fund Facility (EFF) worth approximately $7 billion. This agreement still awaits approval from the IMF Executive Board, with no specific date set for the vote.
Moody’s commented that once the loan deal is approved, which is highly anticipated, it will significantly boost Pakistan’s funding prospects. The new IMF program is expected to provide reliable financing from the IMF and attract additional funding from other bilateral and multilateral partners, addressing Pakistan’s external financing needs.
Nonetheless, Moody’s cautioned that the government’s ability to consistently implement reforms will be crucial to maintaining continuous financial support throughout the IMF program, ultimately reducing liquidity risks.
The new IMF EFF requires Pakistan to undertake extensive reforms, including broadening the tax base, eliminating exemptions, timely managing and privatising energy enterprises, phasing out agricultural support prices and related subsidies, advancing anti-corruption measures, enhancing governance and transparency, and gradually liberalising trade policy.
Moody’s also warned that rising social tensions, driven by the high cost of living—which could be exacerbated by increased taxes and future energy tariff adjustments—might hinder reform implementation. Furthermore, the coalition government may struggle to maintain sufficient electoral support to implement these challenging reforms consistently.
An IMF report published in May highlighted Pakistan’s external financing needs, estimated at $21 billion for fiscal year 2025 (ending June 2025) and approximately $23 billion for fiscal years 2026-2027.
Moody’s noted that Pakistan’s external position remains precarious, with substantial external financing requirements over the next three to five years.
The country remains vulnerable to policy slippages, weak governance, and high social tensions, which could impair the government’s ability to advance reforms, complete IMF program reviews, and secure external financing.
