US-based Citibank has advised Pakistan to secure help from the International Monetary Fund (IMF) to avoid default on its foreign debt repayments in the face of an ongoing political crisis.
In a report, "Pakistan: could the political chaos lead to sovereign default?" released in New York Wednesday, Citibank cited a rising chance of default over mounting political instability, dwindling foreign exchange reserves and the weakening Pakistani rupee. "Pakistan perhaps now needs an IMF stabilisation programme to manage the dire situation," it said.
The bank said if Pakistan opted to default, it would have to reschedule all of its debt, which amounted to 2.6 billion dollars in self-issued bonds and 13.9 billion dollars in bilateral debt. "Such a rescheduling would undermine the country's ability to attract foreign investment, which is desperately needed to support a ballooning trade deficit," the report said. Citibank also said it expected the rupee's fall to continue in the light of government inaction and this week's break up of the government coalition, warning that if the currency continued slipping, Pakistan would be forced to reschedule its debt payment of around 500 million dollars due in February.
The rupee has fallen more than 18 per cent in the past four months, taking an especially hard hit since the split of the country's two major political parties. Pakistan's benchmark stock index has also lost around 45 per cent of its value in six months.
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