“We have never defaulted before. We will not even be close to default … Let me clarify that the bond will be paid and there is no delay in this and even arrangements have been made in principle for upcoming payments in the next year.”
By Staff Reporter
ISLAMABAD: Finance Minister Ishaq Dar said the government will fulfill its external debt commitments including the repayment of a $1 billion sukuk bond that’s due on December 5.
“There is no chance of default. Repayment will be done on time,” Dar said in a televised message on Saturday.
The minister said there were rumors that the country would not be able to pay $1 billion against the maturity of five-year sukuk, or Islamic bonds.
“We have never defaulted before. We will not even be close to default … Let me clarify that the bond will be paid and there is no delay in this and even arrangements have been made in principle for upcoming payments in the next year.”
Pakistan’s risk of default, measured through the five-year currency default swap (CDS) index, spiked 4.2 percentage points to a new high at 64.2 percent over the weekend, suggesting that the country lacked resources to meet the growing import payments and foreign debt repayments on time.
The yield, (rate of return) on the Sukuk surged, by 964 basis points in a day to 69.96 percent. The spike in the yield suggests that investors are thinking the country may default on the $1 billion.
The five-year CDS exhibited a high risk of default after Pakistan announced that Saudi Crown Prince Mohammad bin Salman had postponed his visit to Islamabad and that a new date would be announced soon.
The Crown Prince had been expected to announce investments of over $10 billion during his trip.
The minister said arrangements for debt repayments for next year have also been done “in principle.”
“No one should worry about the rumors … they were spread apparently for political purposes. This is highly irresponsible behavior,” Dar said.
The minister estimated the country’s current account deficit would be at $6 billion at the end of June 2023, half of that of an earlier projection. He said the deficit is expected to be less than $400 million in October.
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