Fast-tracked: Pakistan’s $1 billion sukuk repayment

The hard-currency outflow has been financed from multilateral and bilateral sources and will not affect the country’s forex reserves.

By Staff Reporter

KARACHI: Bolstered by financing from allies and international institutions, Pakistan is all set to fork out $1 billion in repayment on an international sukuk bond on December 2, three days ahead of its due date, the central bank said on Friday.

“We have arranged funds and plans to repay a $1.08 billion sukuk bond on December 2,” central bank Governor Jameel Ahmad said at a briefing . “The funding has been lined up from multilateral and bilateral sources to ensure the repayment would not affect foreign exchange reserves.”

Pakistan’s reserves with the central bank stood at $7.8 billion as of Nov. 18, barely enough to cover a month’s imports.

Ahmed said an immediate inflow of $500 million was expected on next Tuesday from the Asian Infrastructure Investment Bank.

Pakistan’s risk of default, measured through the five-year currency default swap (CDS) index, spiked last week on talks of the country’s ability to meet the growing import payments and foreign debt repayments on time.

Pakistan’s bonds were under pressure soon after the United Nations Development Organization suggested the cash-strapped country should restructure its debt following devastating floods that killed more than 1,600 and damaged $30 billion worth of infrastructure. The flood devastation fanned fears that Pakistan would not meet its debt obligations,

The central bank chief said reserve levels will depend on the continued realisation of expected inflows and rollover of loans from friendly countries. “In November only we repaid $1.8 billion of commercial debts without impacting our reserves levels so hopefully the reverse will be much higher by the end of the financial year in June 2023.”

The country’s repayment needs in the current fiscal year stand around $25 billion, with most of it rolled-over or paid. Pakistan faces economic turmoil, with fast depleting foreign reserves, a declining currency, and widening fiscal and current account deficits.

The economic meltdown has been compounded by political instability and an expected delay in loan disbursal from the International Monetary Fund (IMF).