photo: fileThe International Monetary Fund (IMF) said on Thursday that Pakistan’s external financing needs remain large but its foreign exchange reserves coverage is precarious at only 70% of the country’s short-term foreign debt. The report warned about the growing risk to Pakistani banks from a substantially large exposure to the government debt. “External financing needs will remain large, and reserve coverage is forecast to remain precarious in several countries, averaging about 70% of short-term external debt in Egypt, Pakistan, and Tunisia,” stated the report released on Thursday. Commenting on the government’s high gross financing needs, the IMF said that elevated public sector gross financing needs are still a significant challenge, which will reach “21% of GDP by 2024 for Pakistan” (or over Rs22 trillion). High rate impactThe IMF said that a prolonged period of higher interest rates could trigger adverse feedback loops between the sovereign and the banking sector.
