Even as Pakistan assured that it will not fail in debt repayment due in early December, the risks of a possible default will linger.
Jameel Ahmad, Governor, State Bank of Pakistan (SBP)–the country’s central bank, said that there was no default threat and that the country would repay the $1 billion international bond on December 2 while the due date is on December 5. Pakistan is expected to get a financial assistance of $500 million this week from the Asian Infrastructure Investment Bank (AIIB). But the problem is that Islamabad would require about $32 billion for debt repayment in the current financial year.
Analysts said that with dwindling foreign exchange reserves, the challenges will continue.
Talks with International Monetary Funds have also been delayed, something that the Shehbaz Sharif government will not be happy about.
Pakistan’s foreign exchange reserves held by the SBP, on November 18, held by SBP stood at $7,825.7 million. On November 11, it was $7,959.5 million. In July, at the beginning of the new financial year, the country’s forex reserves were recorded at $8385.4 million.
“Today, our default risk has climbed up again and reached dangerous levels. This risk won’t vanish even after the December bonds are paid off. At the risk of sounding an alarm, I have to say that we have no room left for error. Concrete measures that reassure markets and lenders are urgently needed,” Pakistan’s former Finance Minister Miftah Ismail wrote in an article that was published in Dawn. Ismail was instrumental in reviving the $6 billion loan package with the IMF but negotiations are slowing down.
The ninth review meeting of the IMF loan package that was slated to be held last month has not taken place and no final date has been fixed yet for the same.
The rising political uncertainty has further jolted the already battered economy of the country.
The country has been using the most of the financial assistance received from other countries and the multilateral agencies including the IMF to service debts.
In the process, Islamabad has littles resources to direct funds towards other development projects.
Ismail underlined the need to prioritise national interest over political interest. “This is that time. This government will have no right to criticise PTI or anyone else if, having eagerly decided to come in power, it is unable to do what is right for the country,” the former Finance Minister added.