By Staff Reporter
Finance Minister Ishaq Dar on Sunday said Pakistan will not seek debt restructuring from Paris Club creditor nations as he stepped up attempts to calm frayed investor nerves after a credit rating downgrade.
Minister Dar made the statement at a press briefing in Islamabad days after Moody’s downgraded Pakistan’s credit rating from B3 into junk territory at Caa1, citing external risks and concerns about its ability to secure required financing to meet its needs in the next few years.
Dar said the main reason behind the rating agency’s move was concerns that Pakistan was seeking the rescheduling of the $10 billion debt owed to the Paris Club – a group of wealthy creditor nations.
“We have decided not to go to Paris Club,” Dar said. “It is decided at a meeting with the Prime Minister Shehbaz Sharif that it’s not in the nation’s interest to ask for a restructuring.”
“We will fulfil all sovereign [debt] commitment,” Dar added.
Dar also dismissed market rumours that the government might extend maturities for its bonds.
“The country will fulfil all multilateral, international and bond obligations. God willing, we will pay the bonds on time,” said Dar. “We are not extending the bond maturity.”
Eurobond maturity is due in December .
The country’s sovereign dollar-denominated bonds fell to record lows on Wednesday, signalling growing fears of a default.
Shorter-dated issues suffered the biggest decline, with the 2024 bond bid at 40.2 cents on the dollar, according to Tradeweb data. Bonds due in 2025 and 2027 fell just over 4 cents while longer-dated maturities were bid at just over 36.6 cents in the dollar.,
The premium demanded by investors to hold the bonds blew out to record levels, with the sovereign spread over US Treasuries widening to 2,442 basis points on the JPMorgan EMBI Global Diversified index.
IMF Programme
Dar also reaffirmed the government’s stance to fully honor all the commitments made with International Monetary Funds (IMF) and other creditors.
“All the commitments made with creditors would be fulfilled in its letter and spirit.”
The minister said prior to current program with IMF, the government of Pakistan Muslim league-N had completed a program with the fund in 2016, adding that this time the government too protect all the agreements done with the Fund.
The minister said ninth review with IMF is scheduled on October 25 and all previous commitments would be completed in order to successfully completed the program second time, besides maintaining the reputation of the country in international market.
Stuck up cargoes
Dar also announced to allow clearance of stuck up import cargoes at ports where the letter of credit up to $50,000 were opened.
“It would help to overcome over 4,000 complaints as imports consignment are stuck up at ports and importers are forced to pay heavy demiurges to customs officials for non lifting of consignments.”
The minister said PM Sharif had received complaints from the business community in which they said that their shipments were stopped arriving, LCs opened and there was not any mechanism for the payment due unavailability of credit.
The minister said the central bank had compiled the data and as a first step it was decided that all the pending payments worth upto $50,000 would be cleared, adding that about 7,952 payments would be made, which would help to clear about about 52 percent pending LCs.
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