(Bloomberg) -- Pakistan is pursuing efforts to secure the remaining $2 billion in external funding gap out of a $6 billion target to revive a long-delayed bailout program with the International Monetary Fund.

The South Asian nation has lined up $4 billion in external financing and hopes to obtain a deal with the lender before it unveils its budget on Friday, the Ministry of Finance in Islamabad said Monday in an emailed response to questions from Bloomberg News. 

Urgency is growing for Pakistan to restart its $6.7 billion bailout program which is set to expire in June. The external financing gap and exchange-rate policy are emerging as among the biggest roadblocks, with the program stalled for more than six months.

“Pakistan remains committed to completing the IMF program and has already demonstrated its seriousness,” the ministry said. Pakistan is committed to mobilizing additional liquidity despite significant contraction of the current-account deficit which has reduced the requirement, said the ministry.

Saudi Arabia and the United Arab Emirates have committed to provide fresh financing of $3 billion to Pakistan. China and its state-owned banks have rolled over $4 billion in loan commitments.

The IMF reiterated its stance that the loan will resume once there is “proper market functioning” of the Pakistani rupee and the government follows IMF program goals and adequate financing when it presents the national budget, Esther Perez Ruiz, the IMF’s resident representative for Pakistan, said in an email Monday. IMF staff continues the engagement with the Pakistani authorities to pave the way for a Board meeting before the current program expires, said Ruiz.

Bonds Advance

The nation faces about $22 billion of external debt payments for fiscal year 2024, which begins in July, according to Columbia Threadneedle Investments. That level is about five times its reserves. To meet IMF demands, authorities have raised taxes, hiked energy prices and let the rupee weaken. 

“Pakistan will struggle to muddle through much longer without a program given its limited reserve buffers and elevated external financing needs,” said Patrick Curran, a senior economist at Tellimer based in Portland, Maine. “Default is inevitable if IMF support is not secured.”

Dollar bonds due in April 2024 advanced for a six straight day on Tuesday, with the notes quoted at about 56.35 cents on the dollar. The rupee has lost more than 20% this year after officials devalued the currency in January, making it one of the worst performers globally.

Pakistan’s economic crisis comes as the country is also facing political stress, with former premier Imran Khan and his supporters clashing with the powerful army, a traditional power base in Pakistan.

The external funds, along with the resumption of the IMF loan, will be crucial to overcome a dollar crunch, ease supply shortages, and pull the $350 billion economy out of default risks ahead of elections expected later this year. 

--With assistance from Ruchi Bhatia.

(Updates with bond prices, analyst comment and rewrites throughout.)

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