Dar for bilateral lenders debt restructuring — with or without IMF

ISLAMABAD: With or without the IMF, Pakistan would go for debt restructuring of its foreign loans with bilateral lenders, declared Finance Minister Ishaq Dar on Saturday while unveiling the country’s plan to get breathing space in the wake of dwindling foreign exchange reserves.

The minister said the government did not plan to increase the petroleum development levy beyond Rs50 per litre.

Addressing a post-budget news conference here at the P-Block, Dar ruled out the possibility of debt restructuring of domestic loans, arguing that it was not an appropriate time to do so, being a sovereign state. He said there was a need to learn the way of surviving within means. Had his advice been paid heed a few years back, the country would not have faced the current crisis-like situation. “We cannot print dollars, so debt restructuring from bilateral partners is under consideration. But external loan restructuring from the Paris Club or multilateral donors such as the IMF, World Bank and Asian Development Bank will not be sought at all,” Dar declared.

Accompanied by Minister of State for Finance Dr Aisha Ghous Pasha and other members of the economic team, Ishaq Dar said that there would be no haircuts and the government would not go for reprofiling of loans or get an extension in repayment periods. However, he did not name any bilateral donors. It is relevant to mention here that China’s outstanding foreign loans stand at approximately $27 billion, including $10 billion in bilateral debt, $4 billion in SAFE deposits, $4 billion in currency swap arrangements, $6 billion in commercial loans and others.

Dar claimed that Pakistan did not require restructuring of its domestic debt keeping in view a higher interest rate environment. He said the government was making plans to allow investment into treasury bills by the general public to reduce reliance on banks through different instruments. He said the chances of undertaking the 10th Review of the IMF programme were over, but they were hoping for completion of the 9th Review by June 30, 2023, so that Islamabad might get a tranche of $1.2 billion from the Fund.

The government, he said, sought $2.4 billion from the IMF through the completion of 9th and 10th Reviews at the time of preparation of the budget, and projected it through the budget 2023-24 documents. However, now it seems that the 10th Review might not be possible, so efforts would be made to bridge the financing gap on the external financing front through commercial lending of $3.5 billion.

To a query, Dar said the federal cabinet has no intention of getting an extension in the time-frame of the government tenure and, therefore, the government allocated funds for holding general election in the coming financial year. The coalition partners might have different views about using constitutional provisions to extend the time-frame of the assemblies.

Regarding the delay in receiving $800 million outstanding amount from Etisalat on account of the PTCL privatisation, he said it was a bad deal as 300 properties were required to be transferred in their names out of which 30 to 32 properties have not been transferred so far. The evaluation done by them stood at $776 million, so the remaining amount stood at just $24 million. Now Pakistan has made a request to settle it at $264 million. “Let’s admit we are on a weaker wicket,” he added.

To another query, he said Pakistan would receive $2 billion in additional deposits from the Kingdom of Saudi Arabia and $1 billion from the UAE and they had even extended assurances to the IMF. There was a Plan B also, and Pakistan would not default at all. He said the government provided ad hoc relief for the salaried class and it would be merged into basic pay when the fiscal space is available in future.

The finance minister said that jacking up remittances limits up to $100,000 from Rs5 million could not be termed an amnesty scheme and argued that the limit was standing at Rs10 million, which was brought down to Rs5 million during the last government tenure. Every businessman raised this issue and argued that the facility got reduced in the wake of devaluation of exchange rate. This limit was aligned with the massive devaluation of the exchange rate, he added. He said that out of total subsidies of Rs1.074 trillion, the government allocated Rs9.7 billion for the power sector and stated that more reforms should be undertaken to fix perpetual cash bleeding.

Dar claimed that the budgetary numbers were realistic and extended all-out support to the FBR when a journalist criticised the performance of the tax collection machinery. “Please bring any contractor who could collect Rs12 trillion, then the FBR will be closed down for one year,” he remarked.

Reuters adds: Bilateral creditors made up $37 billion of Pakistan’s debt in the fiscal year 2021, out of which $23 billion is owed to China, according to an IMF country report released last year. Dar claimed that a projection in the government’s budget for 3.5pc economic growth for the year ending in June 2024 was a “realistic target” and “on the lower side”. He said he was “hopeful” that Pakistan would pass its next IMF review, the country’s ninth, but that he “didn’t think” it would clear reviews beyond that.