File photo of Finance Minister Ishaq Dar, courtesy PID
Finance Minister Ishaq Dar on Thursday reiterated that that Pakistan will not default, whether or not it can revive the suspended International Monetary Fund (IMF) loan program that has been pending since November 2022.
Addressing the Islamabad Security Dialogue on the ongoing delay to the revival of the IMF local facility through a staff-level agreement, he sought to discourage the spread of “rumors” about Pakistan defaulting on its debt obligations. “Whether IMF is or not, Pakistan will not default,” he said, reiterating that Islamabad had fulfilled all prior conditions required by the IMF to revive the loan facility.
“International politics based on injustice with Pakistan should be ended. Internationally, people are amazed at how Pakistan is managing,” he said, referring to several claims by Finance Ministry officials that the IMF was resisting signing the staff-level agreement due to a geopolitical agenda. Technical discussions with the IMF ended on Feb. 9, he said, adding that there remained a “gap” on the matter of the external account. “If the IMF wants more time for the staff-level agreement, it can take it. The payments in May and June will be done on time,” he reiterated, adding Pakistan has to repay $3.7 billion in debts by June.
Dar also stressed that international rating agencies should not discuss a potential default in Pakistan, adding that financing would be arranged for payments in the current fiscal year as friendly countries had promised help. Earlier this week, the Moody’s Investor Service warned that the country could default without an IMF program, as its foreign exchange reserves were “very weak.” Prior to that, Fitch Ratings had similarly said risks for Pakistan remained heightened and there was a “real possibility” that it would need to restructure its debts.
The country’s foreign exchange reserves are roughly $4 billion, barely enough to cover a month of imports. The low reserves, coupled with mismanagement and political instability, have surged the inflation rate to 36.4 percent—the highest in its history. Amidst this, Pakistan has been striving to revive the $6.5 billion bailout with the IMF, with observers saying it could be key to averting default in the short-term.
However, addressing a press conference, IMF spokeswoman Julie Kozack maintained that Pakistan needs significant additional financing before a staff-level agreement can be signed for the revival of the suspended bailout. While noting that financing already committed by friendly nations was welcomed, she said that the IMF team remained engaged with Pakistani authorities to address a “very challenging” situation.
According to Kozack, Pakistan’s economy was facing stagflation, has very large financing needs and has also been affected by a series of shocks including severe floods.