KARACHI: Amid reports unprecedented flooding has hit Pakistan’s already fledgling economy hard, Finance Minister Miftah Ismail on Friday said that Islamabad will not seek any relief from commercial banks or Eurobond creditors.

In a tweet, the minister said: “Given the climate-induced disaster in Pakistan, we are seeking debt relief from bilateral Paris Club creditors.”

However, he emphasised, “we are neither seeking, nor do we need, any relief from commercial banks or Eurobond creditors. We have a $1bn bond due in December which we will pay on time and in full”.

He said that “we have been servicing all our commercial debt and will continue to do so. Our Eurobond debt is only $8bn due between now and 2051. That’s not a large burden. A significant portion of our debt is from friendly countries who have said they will re-roll their deposits”.

Meanwhile, Dawn.com quoted Mr Ismail as telling some TV channels that International Monetary Fund Managing Director Kristalina Georgieva had “expressed agreement” with Pakistan’s request to ease the conditions imposed on the country under the Extended Fund Facility (EEF) programme.

He said the IMF official had also agreed to increase the amount Pakistan would receive in the next tranche. He added, however, that a “lot of negotiations” were yet to be held with the lender.

The finance minister said he had informed the IMF of Pakistan’s changed economic situation after the floods, the destruction of cotton crops and the difficulties the country would face in ensuring adequate wheat supplies.

“They (IMF officials) understood our point and almost said yes but formal discussions will happen in two weeks when I go to Washington. The conditions will be relaxed keeping in view the situation and the amount of the tranche will also be increased,” he said.

Mr Ismail said he also held meetings with World Bank officials, adding that the country would receive $2bn from it this year.

“If Sindh’s entire cotton [crop] is destroyed after the floods, then we will have to import cotton crop. Similarly, if we cannot sow wheat at the right time, then the wheat [output] will be reduced. Should we let our people die? We will have to import that as well,” he said.

When questioned about the rupee’s sharp decline against the dollar, Mr Ismail said the government was not in a position to intervene in the market due to the IMF’s conditions and a shortage of dollars.

“Dollar is strengthening against all currencies. Pakistan’s perception of default has increased [but] we will absolutely not default. This is why the dollar has risen but it will come under control in the coming days,” he emphasised.

Pakistan’s bonds

In a related development, Pakistan’s bonds slumped to just half their face value on Friday after The Financial Times said a United Nations development agency was urging the country to restructure its debt.

One of the main sovereign bonds due for repayment in 2024 slumped more than 10 cents to about 50 cents on the dollar, while another due in 2027 fell to about 45 cents.

Published in Dawn, September 24th, 2022

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