Pakistan repays $1b bond, rejects perception of default
SBP says it made the payment to Citigroup; Saudi extends $3 billion deposit term to Pak; ‘I don’t care if they (IMF) come, I don’t have to plead before them. I have to look at Pakistan’s interest first,’ says minister
Pakistan successfully made a repayment of $1 billion against a matured international Sukuk (Shariah-compliant bond), three days ahead of schedule on Friday, dismissing the perception of its default on the payment, local media reported.
As per the actual schedule, the country was to return the maturing investment in the US dollar-denominated global bond on Monday, The Express Tribune reported.
“Yes, we have made the payment of $1 billion,” State Bank of Pakistan (SBP) spokesperson Abid Qamar confirmed to The Express Tribune.
The bank has made the payment to Citigroup, which will transfer the funds onward to the investors.
In a separate development, the State Bank of Pakistan reported that the Kingdom of Saudi Arabia had extended the period of its deposits worth $3 billion, shoring up the country’s foreign exchange reserves and strengthening domestic economy.
According to a statement issued by the SBP, “In implementation of the directives of the Custodian of the Two Holy Mosques, King
Salman Bin Abdulaziz Al Saud … the Saudi Fund for Development (SFD) extended the term for the deposit provided by the Kingdom of Saudi Arabia in the amount of $3 billion to the State Bank of Pakistan. “
The extension of the term of the deposit is a continuation of the support provided by the government of the Kingdom of Saudi Arabia to the Islamic Republic of Pakistan, as the deposit aimed to shore up the foreign currency reserves in the Bank and help Pakistan in facing the economic repercussions of the COVID-19 pandemic; it, furthermore, contributed to meet external sector challenges and achieve sustainable economic growth for the country.
Earlier, the risk of default — measured through a five-year credit default swap (CDS) — hit a record high of 123 per cent last month, building strongly on the perception that the country would fail to arrange the payment amid its low foreign exchange reserves, the report said.
CDS is an insurance derivative that covers the risk of default on the repayment. Experts, however, said this was an ill-liquid and lowvolume traded derivative. A litle trade in CDS had built a wrong perception of default on the repayment.
Finance Minister Ishaq Dar, former Finance Minister Mitah Ismail, and SBP Governor Jameel Ahmad oten reiterated Pakistan would not default on any of its international payments and it would make all payments as per schedule.
“It has more than the required foreign currency reserves,” Ahmad had said last month.
At a time when Pakistan, under the current coalition government of Prime Minister Shahbaz Sharif, is facing a towering challenge of reviving its economic and financial conditions and prevent from moving towards a complete meltdown, Finance Minister Ishaq Dar has expressed his displeasure over the delay in the ninth International Monetary Fund (IMF) review, saying that he will not bow down to what he termed as “dictation” of the IMF.
Talking to a local media outlet, Dar said that he was not concerned whether the IMF team arrives or not to assess and finalise the pending review of the country’s $7 billion
Extended Fund Facility (EFF).
The minister said that the IMF team is more than welcome to visit as the compliance details for the ninth review was “completely in order.”
“I do not care if they come, I don’t have to plead before them. I have to look at Pakistan’s interest first,” he said.
Dar further stated that the delay was not because of discrepancies within Pakistan’s positioning and standing and went on to criticise IMF’S “abnormal behaviour,” stating that Pakistan will not plead to the global lender nor will take any dictation from it.
“I have reassured them that our ninth review is in order and you should come and give Pakistan the $500 million funds,” he said.
The minister further said that if the IMF review team does not come to Pakistan for the review, Islamabad has already formulated a plan to manage the financial situation by geting support from “friendly countries.”
“If they don’t come then we will manage, no problem,” he added.