Citigroup (Citi), a prominent Wall Street bank, predicts that Pakistan will reach an agreement with the International Monetary Fund (IMF) for a new four-year program worth up to $8 billion by the end of July. In light of this, Citi recommends investors to take a bullish position on Pakistan’s 2027 international bond.

While Pakistan recently concluded a short-term $3 billion Stand-By Arrangement with the IMF, the government in Islamabad has emphasized the necessity for a longer-term program. Nikola Apostolov, an analyst at Citi, stated in a client note that despite long-term challenges, there are positive factors that support the Eurobonds.

Apostolov further mentioned that a larger and extended IMF Extended Fund Facility (EFF) program, potentially worth $7-8 billion over four years, could be finalized by July. Additionally, the influx of investments from Saudi Arabia is another potential catalyst for Pakistan’s economic prospects.

Citi’s team visited Pakistan and held discussions with policymakers, including Finance Minister Muhammad Aurangzeb.

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The IMF is expected to send a mission to Pakistan to engage in talks regarding the fiscal year 2025 budget, policies, and reforms under a potential new program.

The aim of these discussions is to establish a foundation for improved governance and to foster stronger, more inclusive, and resilient economic growth that benefits all Pakistanis, as stated by IMF Resident Representative Ether Perez Ruiz.

In terms of investment opportunities, Citi believes that Pakistan’s international 2027 bond offers an attractive position for investors. With ample liquidity and significant upside potential as the risk of default diminishes, the 2027 maturity is currently trading at 87.292 cents on the dollar, according to Tradeweb data.

Pakistan’s shorter-dated bonds, maturing in 2025 and 2026, are trading at 91-96 cents following a substantial rally since the latter part of last year. It is worth noting that Pakistan’s international bonds had plummeted to as low as the mid-20 cents range in 2022.