KARACHI: As $1.8 billion has already been paid alone in the current month against foreign obligations, the State Bank of Pakistan (SBP) on Friday announced to repay $1 billion international sukuk (Islamic bonds) on Dec 2, three days before its due date of mauturity.

Briefing some analysts after the Monetary Policy announcement, SBP Governor Jameel Ahmed said the country has been making foreign payments regularly and expressed confidence that there would be no hindrance in the foreign debt repayments.

“The earlier payment may be the processing time for clearance of the payments,” said a senior analyst who attended the meeting.

The payment of $1bn against the maturity of sukuk remained in the media and the international market showed no confidence which resulted in a very high credit default swap (CDS) rate and weakened the country’s external position.

Despite, this high rate of CDS, Finance Minister Ishaq Dar kept announcing that Pakistan would not default and will pay on time.

He also insisted on Friday that Pakistan would continue to honour its financial commitments on time.

Sharing Bloomberg data on Twitter regarding estimated default probability in emerging markets, he said the US-based media and data company pitched Pakistan’s one-year probability of default at a low of 10pc “as opposed to a highly dubious number of 93pc circulated by an unscrupulous local political leader a few days ago”.

Meanwhile, the central bank has been assuring that arrangements have been made to pay back the entire foreign payments which are in the range of $32-$34bn for FY23. He said since the beginning of the current fiscal year, the foreign payments were not blocked.

“Pakistan is making all commercial and other debt repayments whenever it is due,” said the SBP governor.

He said the payment of $1bn will not affect the foreign exchange reserves since the country will receive inflows from Asian Infrastructure Investment Bank (AIIB).

He said the funding arrangement against the payment of $1bn has been arranged. Pakistan is expected to receive $500m next week from AIIB.

The poor foreign exchange reserves, falling remittances and delayed inflows from IMF have posed serious questions about the timely foreign repayments.

However, the latest development that Pakistan is not close to foreign payment defaults, has supported the exchange rate, to some extent. The dollar price on Friday stood at 223.92 in the interbank market, a two-paisa rise over the preceding day.

Published in Dawn, November 26th, 2022

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