Pakistan ‘will meet debt repayment obligations’
FLOOD AID FUNDS ‘WILL OFFSET’ BOND ISSUE DELAYS
ADDITIONAL international financial commitments to Pakistan in the wake of devastating floods will offset any current account deterioration and delays in the issuing of $2 billion (£1.79bn) in bonds, central bank officials said on Monday (10).
Concerns have risen in recent weeks about Pakistan’s ability to raise finances in order to meet external financing requirements to deal with the floods that have killed 1,700 people and inflicted $30bn (£26.88bn) in damage to the economy.
Pakistan’s ability to tap the international market has been affected by its bonds taking a battering in the secondary market and a ratings downgrade by Moody’s last week, while Fitch and S&P Global have downgraded the country’s outlook.
The deputy governor of the State Bank of Pakistan (SBP),
Murtaza Syed, said Pakistan had secured an additional $4bn (£3.58bn) in funds from multilateral lenders, attendees of a postmonetary policy briefing for analysts said.
The country also kept its key policy rate unchanged at 15 per cent on Monday.
Pakistan’s external financing needs for the current financial year were estimated at around $31bn (£27.8bn). It had shown a funding cushion of about $6 bn (£5.3bn) to shore up fast-depleting reserves, which currently stand at $7.8bn (£6.9bn).
The Asian Development Bank is expected to disburse $1.5bn (£1.3bn), the Asian Infrastructure Investment Bank $500 million (£447.7m), the World Bank $1bn (£895m), and about $1bn from the UN in flood aid, Syed said.
These funds should “more than make up” any effect on the current account and also any delay in plans to raise $2bn from bonds this financial year to meet financing requirements.
The SBP governor, Jameel Ahmad, told participants there was “no question” about Pakistan not meeting debt repayment obligations, and financing requirements continued to be fully met.
He said Pakistan had already made $4.6bn (£4.12bn) in debt payments this fiscal year, and would make the $1bn bond repayment in full in early December.
He added the country’s reserves would now start to strengthen as the focus on liquidity has been drastically reduced. The bank is seeking to increase reserves to $16bn by the end of this financial year.
Ahmad said all targets set along with the IMF had been met by the central bank until the end of September. (Reuters)