Pakistan Finance Minister Miftah Ismail has said that the country will not “default” on its foreign debt despite depleting forex reserves and “pressure” on the domestic currency. The Pakistani rupee hit a record low of 232.92 vis-à-vis the US dollar at the close of trading on Tuesday.
“I know we are not going to default. The governor of [Pakistan’s] State Bank knows we are not going to default. The prime minister knows we’re not going to default,” Ismail said during an interview given to Islamabad-based think tank Tabadlab on Tuesday. The interview was broadcast on the think tank’s social media channel on Wednesday.
The finance minister, who assumed charge as part of Prime Minister Shehbaz Sharif’s cabinet in April, further said that the government would “moderate” its imports while trying to increase exports over the next three months.
“The central problem facing Pakistan right now is that we don’t have money to pay for our all our (external) obligations,” he said.
Likewise, he added that “moderating” imports would have also help in reducing the current account deficit (CAD), which he pegged at nearly $10 billion. “Servicing the current account deficit also bleeds the finances (…) Our aim is to bring the CAD down to zero.”
The minister added that Islamabad will pay nearly $21 billion in external obligations over the next 12 months.
He also informed that Pakistan’s overall external debt amounted to $81 billion, most of which was owed to bilateral lenders such as Saudi Arabia, the United Arab Emirates and China.
The finance minister said that the government hoped to raise 775 billion Pakistani rupees ($3.27 billion) in export revenue in the current financial year, in addition to 800 billion rupees ($3.37 billion) as levies from fuel. Further, he justified the government’s decision to remove fuel subsidies, with petrol and diesel prices jumping by close to a third since the Sharif government came to power.
Further, the minister justified the government’s decision to remove the subsidies on petrol and diesel, the prices of which have been increased by close to a third since the Sharif government came to power.
He said that removing subsidies on fuel and power were also the preconditions of the International Monetary Fund (IMF) before the agency agreed to a staff-level agreement (SLA) with Islamabad this month.
Additionally, he said that removing subsidies on fuel and power were also the International Monetary Fund’s (IMF) preconditions before the agency agreed to a staff-level agreement with Islamabad this month.
The IMF has reportedly agreed to disburse a $1.1 billion tranche under an Extended Financing Facility (EFF), pending approval from the IMF board. Ismail said that the Washington-based lender will provide a total of $4 billion over the next 12 months.
Pakistan has faced an incrementing economic crisis in recent months which has been compounded by soaring commodity prices, including a steep rise in the global crude price. Major ratings agencies such as Fitch and Moody’s have revised their growth forecast for the country in recent weeks. Fitch downgraded its forecast from “stable” to “negative” last week.