Pakistan seeks $11b debt rollover

7 min read


Pakistan seeks $11b debt rollover In order to meet external financing requirements, Pakistan is in talks to roll over $11 billion of bilateral debt to China and Saudi Arabia, said interim Finance Minister Shamshad Akhtar on Thursday, while pointing out that rising crude oil prices pose a threat to the external sector’s stability.

Akhtar informed the Senate Standing Committee on Finance that attempts were being made to raise $26 billion in debt for debt repayments and financing the current account deficits. According to Senator Saleem Mandviwalla, Chairman of the Standing Committee, poverty in the last fiscal year increased from 34% to 40% and unemployment to 10% from 6.3%, according to World Bank estimates.

The International Monetary Fund (IMF) had already approved a $3 billion package of concessionary financing to meet the external financing requirements. “We are working to secure concessionary financing from multilateral creditors to the tune of $6.3 billion,” she stated. Approximately $11 billion in bilateral assistance is being sought, according to the finance minister. Most of these loans are maturing and the country is no longer able to repay them, so it requests further extensions from its bilateral creditors.

Saudi Arabia eyeing $25 billion investment in Pakistan

A senior finance ministry official says Pakistan is working on rolling over a $5 billion Chinese debt and a $6 billion Saudi debt, which includes a safe deposit and oil facility.

The Ministry of Finance revealed a financing gap of at least $4.4 billion on account of Eurobonds and commercial loans. The standing committee was informed that international commodity prices pose the greatest risk to external stability. Compared to June 2023, Brent crude prices have jumped 27% to $95 per barrel in September.

Due to Pakistan’s thin foreign exchange reserves, its external position remains precarious. A briefing on efforts to increase reserves was provided to the committee by the minister. As part of the IMF programme, Pakistan is committed to increasing the State Bank’s reserves to $9 billion, or the equivalent of 2.3 months’ worth of imports.

Caretaker government efforts have been made to speed up the approval of concessionary project and programme loans from multilateral institutions. A total of $6.3 billion is in the pipeline for the current fiscal year, she said. Using higher official inflows and an increase in foreign investment under the Special Investment Facilitation Council (SIFC), the government plans to increase SBP’s reserves to $12 billion by June 2024, or three months of import coverage.

The finance ministry announced the fast-tracking of the second transaction between Karachi Port Trust (KPT) and AD Ports UAE for the outsourcing of bulk and general cargo terminal operations. Pakistan’s economic situation remains weak. According to the September 2023 World Bank report, 40% of households fell into poverty last year, up from 34.2% the year before. From 6.3%, unemployment has jumped to 10%.

In just one month, the PDM government borrowed Rs907 billion

The minister informed the committee that the caretaker government took measures to stabilize the economy and build market confidence. He said that in the first two months of this year, the current account deficit (CAD) decreased by 54% to $921 million. CAD was projected to stabilize around $6.5 billion, or 1.5% of GDP, as trade and investment flows normalized.

Import bans that affected raw material availability for the industry have been removed by the caretaker government. As a result of the relaxation, Letters of Credit are being opened for imports, and the backlog of payments for the Jan-Jul period has been cleared. The caretaker government has taken action to tackle the volatility and speculation in the exchange rate market.

By taking action against exchange companies and cracking down on illegal transactions, the State Bank has reduced the spread between interbank and open markets. In the interbank market, Akhtar said that the rupee strengthened to 289 against the US dollar, an appreciation of 6.4% from 307 on September 5. The rupee strengthened 13% in the open market to Rs290.

She added that the spread between interbank and open markets has narrowed from over 9% to less than 1%. In 2024, the State Bank forecasts that agricultural output would be improved and administrative measures to curb volatility in forex markets would lead to a sharp decline in inflation, according to the minister.

The amount of workers’ remittances dropped by 14% to $27 billion last year. A large spread between inter-bank and open market rates encouraged workers to use non-banking channels, further reducing remittances by 8.5% in the first two months of the current year.

You May Also Like

+ There are no comments

Add yours