Islamabad, Pakistan: Noting that Pakistan is already witnessing a slowdown in economic growth from last year in the aftermath of the COVID-19 pandemic, the fund said that the impact will be amplified by the rising cost of cereals and fuel.
The IMF used a sample of nearly 700 firms from eleven countries through which it assessed the non-financial corporate (NFC) sector’s liquidity and solvency risk and viability over the medium term under different stress test scenarios.
“The health crisis has exacerbated vulnerabilities in the corporate sector, though the effects are heterogeneous across the region,” the media outlet quoted the report as saying.
“Small firms, which entered the pandemic in a more vulnerable position, would remain under high liquidity stress over the medium term, putting a substantial share of these firms’ debt at risk of default,” it added.
Noting that the liquidity needs of firms in contact-intensive sectors have also worsened, the report said it would remain elevated in 2022-23.
Meanwhile, owing to a combination of internal and external challenges of unpredictable tenure in Pakistan, the Ministry of Finance on Friday forecasted tough days ahead, including rising inflation, expanding current account deficit, higher fiscal deficit and dampening economic growth prospects.
According to the Finance Ministry, high international commodity prices not only keep inflation elevated, but they are also a burden on Pakistan’s external account and hence on its foreign exchange reserves.
This comes as Pakistan is already grappling with a massive rise in foreign debt and its economy is slumping to a catastrophic low.