According to Moody’s Investors Service, Pakistan is likely to fail in resurrecting the International Monetary Fund’s (IMF) stalled loan programme worth $6.7 billion before it formally expires in two weeks on June 30.

Without the IMF, the likelihood of the country defaulting on foreign debt payments has increased, with the country’s foreign reserves dipping critically low below $3 billion after Pakistan successfully returned a $1 billion commercial loan to China before its maturity.

The low reserves, which barely cover three-week imports, may put pressure on the rupee against the US dollar, which was trading at Rs287/$ on Wednesday in the interbank market. It is worth noting that on May 11, it was only Rs12 away from a record low of Rs299/$ due to heightened political drama and a terrible law and order scenario. According to Moody’s, Pakistan is at a higher risk of failing to restart its $6.7 billion bailout plan with the IMF, bringing the South Asian country closer to a sovereign default.

“There are growing concerns that Pakistan will be unable to complete the IMF programme, which expires at the end of June,” said Grace Lim, a sovereign analyst with the Singapore-based rating agency. “Without an IMF programme, Pakistan could default due to its extremely low reserves.” In late June, Pakistan repaid $1 billion to China ahead of its maturity date, with the understanding that Beijing would repay the commercial loan to Islamabad before the fiscal year ended on June 30.

The country is making one last push to reactivate its IMF programme, with a $2 billion funding imbalance and exchange-rate policy among the most significant obstacles.

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While the government has pledged to meet billions of debt obligations, investors remained skeptical about the nation’s dollar bonds trading in the distressed territory since last year, the news agency said. Pakistan faces about $23 billion of external debt payments for the fiscal year 2024, which begins in July. On Monday, central bank Governor Jameel Ahmad denied that officials were seeking debt restructuring talks as Pakistan will pay $900 million of sovereign debt in June and expects $2.3 billion of obligations to be rolled over.

The country’s $1 billion bond due in April next year was slightly changed at about 55.6 cents on the dollar in Asian trading on Wednesday, after sliding almost three cents in the previous two days.