File photo of Finance Minister Ishaq Dar. Photo courtesy PID
Finance Minister Ishaq Dar on Monday said he will seek rescheduling of Pakistan’s bilateral debt to secure some “space” for the economy ahead of a looming global recession and the repayment of some foreign loans at the end of the year.
In a meeting with a select group of journalists ahead of his trip to Washington—where he will conduct meetings with the International Monetary Fund—he reiterated that no rescheduling of debt would be sought from the Paris Club, multilateral lenders and international sovereign bonds. According to local media, Dar said Pakistan’s debt to the Paris Club was less 11 percent of its total foreign debt and any relief from it would amount to less than $1.2 billion. “When we are [already] going to arrange $32-34 billion for external payments, another $1.2 billion is no big issue,” he added, referring to the approximately $22 billion required for foreign debt servicing and about $10-12 billion for the current account deficit.
Pakistan has a severe foreign exchange shortage, with estimates suggesting the country only has enough funds to secure two months of imports. The government has taken steps in recent months to curb the current account deficit, but with no reasonable way to restrict imports of essential commodities, it is expect to remain a point of contention for the remainder of the ongoing fiscal year.
Of the bilateral debt that Dar said he would seek rescheduling for, approximately $23 billion of the pending $27 billion is from China. Last month, during Prime Minister Shehbaz Sharif’s visit to New York for the U.N. General Assembly, both the U.S. and IMF urged him to seek relief from Beijing to create space for reconstruction and rehabilitation of flood-hit communities. Apart from China, Pakistan also has loans from several Gulf states, including Saudi Arabia and the U.A.E.
According to local media, Dar reiterated that the government would abide by its commitments to the IMF, adding there would be no attempts to renegotiate it. However, he said the global lender could be requested to provide upfront provisions for releasing tranches under the ongoing bailout program.
The minister also dismissed any plan to launch international bonds—a part of this year’s federal budget—saying this was not the appropriate time. He said he would aim to improve indicators over the next five to six months and then reconsider, adding the government would strive to make up the funding gap through alternative means.
To a question, Dar hoped the completion of the IMF program and an easing of the inflation rate, particularly in energy prices, would alleviate the public’s miseries. He noted that the rupee’s exchange rate against the dollar was persistently improving, reiterating that he had not yet taken any steps to achieve this. However, he warned, he would give a “befitting” response to speculators if the need arose. He said the benefit of an improved exchange rate would be passed on to consumers in the coming months in the form of lower petroleum prices.
Also on Monday, the United Nations Development Program warned that Pakistan was among 54 countries in “dire need” of debt relief, stressing if support were not provided, these countries could witness rising poverty levels and would be unable to invest in climate adaptation and mitigation.