Pakistan will need to pause debt repayments if it does not secure funding from the International Monetary Fund (IMF) soon enough, a US bank warned as diplomatic circles in Washington indicated that Islamabad is close to signing a deal with the financial agency.
But the Bank of America team which prepared the report, also said that China, a close ally, can rescue Pakistan because of its close ties with the country, reports Dawn news.
The bank's team of experts, which includes its economist Kathleen Oh, wrote: "China holds the key for relief in the near term as it is the largest creditor. With closer ties between China and Pakistan, the hope is rising for China to come on board to provide a backstop to its long-time ally."
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Bloomberg which reported the bank's assessment on Monday, also quoted economist Kathleen Oh as saying that "unless the payout comes through soon, a state of moratorium looks unavoidable".
She pointed out that even after weeks of negotiations, it's still not clear "whether and when Pakistan can receive the next installment from the IMF".
Pakistan has implemented a series of policy measures including increased taxes, higher energy prices and increasing interest rates to the highest in 25 years to unlock funding from its stalled IMF $7 billion loan programme, Dawn reported.
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Last week, Finance Secretary Hamed Yaqoob Sheikh told reporters that an agreement was likely in the next few days, though Pakistan has missed such timelines in the past.
Governor State Bank of Pakistan Jameel Ahmad said last week that Pakistan needs to repay about $3 billion of debt by June, while $4 billion is expected to be rolled over.