https://sputnikglobe.com/20220919/pakistan-fm-confident-of-averting-debt-default-despite-flood-induced-economic-pressure---report-1100949657.html
Pakistan FM Confident of Averting Debt Default Despite Flood-Induced Economic Pressure - Report
Pakistan FM Confident of Averting Debt Default Despite Flood-Induced Economic Pressure - Report
Sputnik International
The catastrophic floods ravaged the country's cash-strapped economy, with initial estimates suggesting financial losses of around $30 billion. The Shehbaz... 19.09.2022, Sputnik International
2022-09-19T10:25+0000
2022-09-19T10:25+0000
2022-09-19T10:25+0000
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pakistan
shehbaz sharif
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Pakistan will "absolutely not" default on its foreign debt obligations despite the devastation caused by months-long flooding, Finance Minister Miftah Ismail told Reuters in an interview.The minister, who successfully secured an IMF bailout package in August, said that the Pakistani government would continue to focus on reforms designed to stabilize the economy.The IMF earlier approved a long-awaited $1.17 billion bailout package for Pakistan. The country's foreign exchange reserves currently sit around $8.6 billion, enough to cover the cost of the country's imports for fewer than 40 days.The Sharif government has reduced fuel subsidies by increasing prices at an unprecedented level, a measure facing stiff resistance from former PM Imran Khan's PTI.Ismail hopes that Pakistan will add at least $4 billion in forex reserves despite rising pressure on the current account balance due to the possible rise in the quantity of food and cotton imports, among others.Agriculture-dominated exports are also facing immense pressure as floods destroyed crops in the provinces of Sindh, eastern Punjab and Balochistan, the region known as the country's food basket.The minister acknowledged investors' "jittery" sentiments about Pakistan, given the economy has suffered at least $18 billion in losses due to floods, a figure which may rise as high as $30 billion.Yields on Pakistan's five-year Sukuk - shariah-compliant bonds maturing in December 2022 - collapsed by a whopping 39 percent last week, indicating a massive slide in investor confidence in the economy despite the revival of the International Monetary Fund (IMF) bailout package.According to Ismail, external financing sources were secured, including over $4 billion from the Asian Development Bank (ADB), Asian Infrastructure Investment Bank, and the World Bank.Meanwhile, Saudi Arabia has provided massive relief to the government as it rolled over a $3 billion debt for one year on the existing terms.
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Pakistan FM Confident of Averting Debt Default Despite Flood-Induced Economic Pressure - Report
The catastrophic floods ravaged the country's cash-strapped economy, with initial estimates suggesting financial losses of around $30 billion. The Shehbaz Sharif-led government has been seeking assistance from foreign governments to overcome the crisis.
Pakistan will "absolutely not" default on its foreign debt obligations despite the devastation caused by months-long flooding, Finance Minister Miftah Ismail told Reuters in an interview.
"The path to stability was narrow, given the challenging environment, and it has become narrower still. But if we continue to take prudent decisions — and we will — then we're not going to default. Absolutely not," Ismail told the organization.
The minister, who successfully secured
an IMF bailout package in August, said that the Pakistani government would continue to focus on reforms designed to stabilize the economy.
The IMF earlier approved a long-awaited $1.17 billion bailout package for Pakistan. The country's foreign exchange reserves currently sit around $8.6 billion, enough to cover the cost of the country's imports for fewer than 40 days.
However, the latest government data suggests that recent expenditures reached 12.5 percent of the annual allocation during July-August, limiting prospects for the fiscal plan prepared by the IMF to stabilize the country's economy. The interest payment on debt and defense amounted to as much as 71 percent of total expenditures, leaving much less space for socio-economic development projects.
The Sharif government has reduced fuel subsidies by increasing prices at an unprecedented level, a measure facing stiff resistance from former PM Imran Khan's PTI.
Ismail hopes that Pakistan will add at least $4 billion in forex reserves despite rising pressure on the current account balance due to the possible rise in the quantity of food and cotton imports, among others.
Agriculture-dominated exports are also facing immense pressure as floods destroyed crops in the provinces of Sindh, eastern Punjab and Balochistan, the region known as the country's food basket.
The minister acknowledged investors' "jittery" sentiments about Pakistan, given the economy has suffered at least $18 billion in losses due to floods, a figure which may rise as high as $30 billion.
"Yes, our credit default risk has gone up, our bond prices have fallen. But (…) I think within 15 to 20 days, the market will normalise, and I think [investors] will understand that Pakistan is committed to being prudent," the minister added.
Yields on Pakistan's five-year Sukuk - shariah-compliant bonds maturing in December 2022 - collapsed by a whopping 39 percent last week, indicating a massive slide in investor confidence in the economy despite the revival of the International Monetary Fund (IMF) bailout package.
According to Ismail, external financing sources were secured, including over $4 billion from the Asian Development Bank (ADB), Asian Infrastructure Investment Bank, and the World Bank.
Meanwhile, Saudi Arabia has provided massive relief to the government as it rolled over a $3 billion debt for one year on the existing terms.
