Wednesday February 01, 2023

Pakistan seeking debt relief from Paris Club creditors: Miftah

We are neither seeking nor do we need, any relief from commercial banks or Eurobond creditors, says Miftah

September 24, 2022
Federal Minister for Finance and Revenue Miftah Ismail. — AFP/File
Federal Minister for Finance and Revenue Miftah Ismail. — AFP/File

ISLAMABAD: Minister for Finance Miftah Ismail said on Friday that Pakistan was seeking debt relief from the bilateral Paris Club creditors in the wake of climate-induced disaster in Pakistan.

However, the country has been neither seeking nor there is any need of any relief from commercial banks or Eurobond creditors. “Given the climate-induced disaster in Pakistan, we are seeking debt relief from bilateral Paris Club creditors. 

We are neither seeking nor do we need, any relief from commercial banks or Eurobond creditors. We have a $1 bn bond due in December, which we will pay on time in full. We have been servicing all our commercial debts and will continue to do so. Our Eurobond debt is only $8 bn due between now & 2051. That’s not a large burden. A significant portion of our debt is from friendly countries who have said they will re-roll their deposits,” he stated in his tweets on Friday.

Having no plans for seeking debt cancellation from multilateral lenders such as the IMF, World Bank, or Asian Development Bank, Pakistan has sought relaxation in targets from the IMF under the existing Extended Fund Facility (EFF) program, reduction in Fuel Price Adjustments and clubbing the next two tranches for getting financial space.

“Islamabad also made a request to the IMF for exploring possibilities to provide additional funding from other windows by jacking up the quota into the fold of the IMF,” top official sources confirmed while talking to The News here on Friday.

When this scribe contacted Minister for Finance Miftah Ismail, who is currently visiting the US, he said that Pakistan did not seek any debt cancellation from the IMF or the World Bank as it did not require it at all. “Prime Minister Shehbaz Sharif has made a request to the Managing Director of the IMF for relaxing the IMF targets, reducing Fuel Price Adjustment (FPA) and clubbing the 9th and 10th reviews and release of two or three tranches simultaneously.” The minister said that the FPA on account of electricity was causing a burden on our electricity consumers, so the premier asked the IMF MD to consider a reduction in FPA so that the people could afford a reduction in power bills.

He said the premier also made a request to the IMF for exploring the possibility of additional funding from the IMF from other available windows by jacking up the quota of Pakistan. The minister said that in the aftermath of severe floods, the macroeconomic situation changed altogether whereby exports might be reduced while imports might be increased, creating difficulties for the country to manage its external financing. The country might require to import more products from the agriculture sector such as wheat and cotton mainly because of the devastating effects of super floods. The recent floods had caused losses to the tune of $30 billion for the struggling economy of Pakistan at a time when the IMF had assessed that Islamabad required a $30 billion gross financing requirement in the pre-flood situation. The external sector might face more pressure in the wake of increased pressures on the trade deficit and yawing the current account deficit.

To another query regarding his meeting with WB’s high-ups, Minister for Finance Miftah Ismail said that the WB agreed to repurpose $2 billion loans for the flood-affected areas. “Our meetings with the WB officials remained very fruitful and the positive outcomes will help to stabilise the country’s economy,” he concluded.

However, other top official sources said that Pakistan could not seek Rapid Financing Instrument (RFI) in the wake of floods because such a window could only be explored when the country did not have another Fund programme. When the concerned official was asked how Pakistan had managed to obtain a $1.4 billion RFI from the IMF under the last PTI-led regime on the occasion of the Covid-19 pandemic, the official replied that Pakistan got an RFI facility when the EFF was installed mode. Now the IMF programme has been revived after the completion of the 7th and 8th reviews and the tranche has been released, so the country could not seek an RFI at this moment. However, there are possibilities for exploring other windows.

To help prevent or mitigate crises and boost market confidence during periods of heightened risks, the IMF members with already strong policies can use the Flexible Credit Line or the Precautionary and Liquidity Line. The Rapid Financing Instrument and corresponding Rapid Credit Facility for low-income countries provide rapid assistance to countries with urgent balance of payment needs, including commodity price shocks, natural disasters and domestic fragilities.