KARACHI: Pakistan should seek the restructuring of entire dollar-denominated debt worth around $99 billion, said former finance minister Shaukat Tarin on Friday.
Addressing a press conference, he said the government should go for across-the-board restructuring of foreign loans without any bias for or against bilateral/multilateral creditors.
On becoming finance minister in October, Ishaq Dar had vowed to seek the rescheduling of $27bn non-Paris Club debt that Islamabad owes mainly to China.
Mr Tarin’s recommendation is in line with the views expressed recently by former central bank governor Syed Salim Raza who called for “substantial”, as opposed to “piecemeal”, restructuring of dollar-denominated loans.
The country’s import cover, which indicates the number of months of imports that can be covered with foreign exchange reserves, has been steadily going down. The central bank is left with only $7.5bn of reserves, which amount to less than two months of import coverage.
“There’s no debt sustainability right now,” said the senator who has served as finance minister twice in different governments.
His comment on the issue of debt sustainability is in the context of the unusually high level of credit default swap (CDS), which is a tool that international bondholders use to protect themselves from a possible default by debt-issuing sovereign nations. It touched the 93pc level recently, which indicated the complete unwillingness of international investment banks to insure the country’s dollar-based debt.
Mr Tarin also asked the incumbent finance minister to press global lenders for additional financial support as the government has already followed the advice of the International Monetary Fund (IMF) on the upward revision of electricity tariffs. “We’ve suffered $30bn losses because of the floods. They should tell the multilaterals to put additional funds of $10bn-$15bn on the table,” he said.
Mr Tarin criticised the IMF for linking the disbursement of a $1.18bn tranche to Pakistan plugging a $4bn “funding gap” through additional inflows from “friendly countries”. He asked, rhetorically, as to how the IMF could make such a demand. After all, it’s supposed to be the global lender of last resort that countries fall back on to avoid sovereign defaults.
He said a major reason for the poor economic conditions is underwhelming tax collection, which slipped about 10 per cent in inflation-adjusted terms last month.
The former finance minister said the declining trade deficit isn’t a cause for celebration because exports were also down by more than 18pc in November.
“The decline will become more pronounced going forward as there’s a 10pc difference in the official and unofficial exchange rates,” he said while noting that many exporters will resort to havala to take advantage of a substantially high difference in the two rates.
Addressing the press conference, spokesman for the PTI on economic affairs Muzzammil Aslam criticised the government’s decision to maintain petroleum prices for another 15 days even though there was a 20pc decline in global prices last month.
Published in Dawn, December 3rd, 2022
