ISLAMABAD: To secure greater breathing space in foreign loan repayments amid tight external account conditions, Pakistan is seeking rescheduling of bilateral debt, which now stands at around $27 billion.
“Rescheduling of bilateral debt is fine,” said Finance Minister Ishaq Dar while ruling out rescheduling of international debt from wealthy western nations under Paris Club, multilaterals and international sovereign bonds.
Talking to journalists on Monday, the minister said there was no point in Paris Club rescheduling debt, because the overall debt to these creditors was no more than 11pc of total foreign debt and debt relief over the year would be less than $1.2bn. Pakistan owes Paris Club countries a combined sum of around $10.7bn.
“When we are going to arrange $32-34bn for external payments, another $1.2bn is no big issue,” Mr Dar said.
Finance minister sees no point in Paris Club rescheduling merely $1.2bn; says conditions not conducive for launch of international bond worth $2bn
The repayments involve about $22bn worth of foreign debt servicing and about $10-12bn of current account deficit.
As of September 30, the State Bank of Pakistan’s (SBP) foreign exchange reserves stood at $7.89bn while the country’s total foreign exchange reserves are reported at $13.6bn, including $5.69bn of commercial bank stocks.
According to the International Monetary Fund (IMF), Pakistan’s total non-Paris Club bilateral debt currently stands at about $27bn, of which Chinese debt is about $23bn.
The US and IMF have been insisting on renegotiation of power purchase agreements with China to secure fiscal space in foreign payments. Non-Paris Club members generally include China, Saudi Arabia and other Middle Eastern states.
Before his weeklong visit to the US to attend annual meetings of the World Bank and IMF besides other important engagements, the minister reaffirmed Pakistan’s commitment to complete the IMF programme with all its conditions in an honourable manner and meet all repayment obligations to multilaterals, bond holders and Paris club creditors.
He said the ninth review with the IMF was scheduled for October 25 and ruled out any consideration for renegotiating the IMF agreement when it was in the last leg of its completion.
The minister also conceded that conditions were not favourable for the launch of a $2bn international bond, budgeted for the current fiscal year, although authorities were planning foreign visits for the purpose.
“I cancelled the itinerary. We can’t issue a bond at this stage,” he said, adding that his priority would be to improve indicators over the next five to six months by hard work and then think about that. To make up for the gap, he said, the government would work hard and find alternative sources. Responding to a question, he said the completion of Fund programme with success and ease in rate of inflation, particularly in energy prices, would bring about a feel-good sense if the government was able to make the people comfortable.
Mr Dar said the IMF programme had only six to seven months to go and he wished its successful completion with honour and dignity and it would be second Fund programme that reached its logical end and both while he led the country’s economic team. He recalled that within days after coming to power in 2013, the PML-N had signed an IMF programme and completed it successfully in 2016.
The minister made it clear that the government would not approach Paris Club or multilaterals for the rescheduling of foreign loans nor extend the date of maturity of international bonds. “Pakistan is an independent and sovereign state and we have to maintain its name, dignity and honour,” he said, adding that the government would have to work hard to ensure all repayments and in time.
The minister now heads to Washington, where central bankers, ministers, private sector executives and people from other walks of life will discuss ways to tackle rising global challenges.
Published in Dawn, October 11th, 2022