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Government will abide by IMF Conditions: Ishaq Dar

Finance minister says Pakistan will not seek debt restructuring from Paris Club creditors following devastating floods

by Staff Report

File photo of Finance Minister Ishaq Dar courtesy PID

Finance Minister Ishaq Dar on Sunday maintained that the ruling coalition will abide by the conditions imposed by the International Monetary Fund (IMF) for the revival of a suspended bailout program earlier this year.

Addressing a press conference in Islamabad, he said credit ratings agency Moody’s decision to downgrade Pakistan’s local and foreign currency issuer and senior unsecured debt ratings from B3 to Caa1 had been addressed by his ministry in a detailed reply to its concerns. “The major reason behind this negative outlook was the speculations that Pakistan was planning to seek help from bilateral Paris Club creditors,” he said, adding that Moody’s believed Islamabad was seeking rescheduling of its loans from the World Bank and the Asian Development Bank.

Stressing that the government, after deliberations, had decided against seeking assistance from the Paris Club, he said the country would “absolutely” pay the $1 billion in international bonds that are due in December. He explained that it had been decided by authorities, including Prime Minister Shehbaz Sharif, that it was not in the nation’s interest to seek a debt restructuring at this time.

Concerns over Pakistan’s debt repayments arose after the prime minister, last month, urged the Paris Club for a debt moratorium to aid in the flood-hit country’s recovery. According to initial estimates, Pakistan has incurred damages of $30 billion, with over 33 million people affected. The country, per authorities, is still in the rescue phase, with expenditures expected to rise as it shifts to rehabilitation.

In his press conference, Dar also clarified that $50,000 pending payments of letters of credit—a mechanism used in international trade to provide economic guarantees from creditworthy banks to exporters—would be cleared within this week. He said the decision had been taken after consultations with State Bank of Pakistan Governor Jameel Ahmed, adding instructions would be issued to clear all LCs as a “first step” toward growth.

According to the finance minister, 7,952 cases of LCs were pending and the announced measures would reduce this number to roughly 3,552.

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