Ishaq Dar to explore options to manage $34bn

ISLAMABAD: To manage external financing requirements of $34 billion, Pakistan will explore options to secure debt rescheduling from bilateral non-Paris Club countries, and optimise programme loans and budgetary support from multilateral creditors during the current fiscal year.

Besides, Islamabad will also request the IMF to provide upfront provisions for releasing tranches under the existing Extended Fund Facility (EFF). The bilateral donors will also be asked to augment financial support in the wake of pressing external financing requirements, especially from Muslim countries.

“We have conveyed our message loud and clear that Pakistan does not require debt rescheduling from the Paris Club countries, which could provide only $1.2 billion in relief to Islamabad in one year,” Federal Minister for Finance Ishaq Dar said while talking to a select group of reporters before his departure for Washington to attend annual meetings of the IMF and World Bank, here on Monday night.

The minister said that the government would not breach the agreement with the IMF and would fulfill all agreed conditions under the existing Extended Fund Facility. He said that the government would manage its budget deficit and primary deficit through prudent fiscal policies by generating tax and non-tax revenues as well as curtailing expenditures. He said that the government could manage its parleys on petroleum development levy and grant fixed electricity tariffs for five export-oriented sectors.

He ruled out the possibility of launching international bonds at this juncture, saying that the international market was not ripe for launching international bonds, so he instructed the finance ministry’s team to cancel their scheduled visit to New York. He said that the exchange rate had improved when he boarded a plane from London. He has not taken any action so far, but if the need arises, he will give a befitting response to speculators. He said that the benefit of an improved exchange rate would be passed on to consumers in the coming months as more cargo was imported to boost stocks of POL products.

He said that he knew about the dynamics of the international bond market and stated that first the macroeconomic fundamentals would be improved and then the international bond market would be explored after building a narrative in support of Pakistan and witnessing improvement in the international environment. Without proper appetite, the bond would not be launched, he made it clear.

He recalled that he had launched a $500 million bond in April 2014, which was oversubscribed by 14 times as the country received offers of $7 billion. Dar said Pakistan would have to pay over $22 billion in the form of external debt and liabilities while the current account deficit was projected in the range of $10 to $12 billion, so the country required $34 billion in external financing during the current fiscal year.

“No need to worry about managing external financing requirements,” he said, and added that they had managed such mammoth external financing in the past in 2017-18 and would do it successfully with God’s blessings in the current fiscal year. He said that he had meetings with important ambassadors like the US, UK, EU, Saudi Arabia, UAE, Qatar, and others to convey the message that Pakistan would not seek debt rescheduling from Paris Club countries. He said that the western countries’ debt-to-GDP ratio was over 100 percent while Pakistan’s was below 80 percent, so Islamabad could manage its external debt liabilities without seeking any deferment.

He said that everyone was thinking that Pakistan would be requiring rescheduling of debt from the Paris Club countries, but the government took a principled stand that Islamabad would honour all its international commitments and the repayments would be made well within the stipulated timeframe. He said that the government would make a repayment of $1 billion on the maturity of the international bond in December 2022.

To a query regarding the continuation of work in the PM Office on debt rescheduling from bilateral countries, he said that Pakistan would explore its option to create the desired space so bilateral creditors and non-Paris Club donors would be asked to restructure debt in the wake of the severe flood situation. He said that the outstanding loan from the Paris Club stood in the range of $10 billion and the country could get relief of $1.2 billion for one year, so the rescheduling from the Paris Club would not be sought.

He said Pakistan had signed a rescheduling of debt from Paris on Jan 1, 1999, after the nuclear explosion, when Islamabad had to face economic sanctions and the country was left with no other options. He stated that the country now has available options that will be availed to manage external financing requirements.

The minister said that the World Bank had increased the provision of its portfolio from $1.5 billion to $2.3 billion after his meeting, so efforts would be made to increase each and every penny to materialise the financing requirements of $32 to $34 billion for the current fiscal year.

Dar will stop over in London on Tuesday (today) during his journey from Islamabad to Washington where he will hold a meeting with PMLN chief Mian Nawaz Sharif to discuss important political and economic issues, especially related to important appointments in the country.

Ishaq Dar said he would be holding around 44 meetings with IFIs and bilateral countries’ dignitaries and representatives on the sidelines of attending the annual meetings of Breton Wood Institutions (BWIs) such as the IMF and World Bank. He is also scheduled to hold meetings with US treasury departments and other finance ministers of bilateral-friendly countries.