By Gibran Naiyyar Peshimam
ISLAMABAD (Reuters) Pakistan will definitely not default on debt burden despite catastrophic floods, the finance minister said on Sunday, signalling there will be no major deviation from reforms made to stabilise a struggling economy.
Floods have affected 33 million Pakistanis, inflicted vast amounts of dollars in damage, and killed over 1,500 people creating concern that Pakistan won’t meet debts.
The road to stability was narrow, given the challenging environment, and contains become narrower still, Finance Minister Miftah Ismail told Reuters at his office.
But if we continue steadily to take prudent decisions and we’ll then weren’t likely to default. Definitely not.
Pakistan could bring a global Monetary Fund (IMF) programme back on the right track after months of delay, because of tough policy decisions. However the positive sentiment was short- lived prior to the catastrophic rainfall hit.
Regardless of the disaster, Ismail said that a lot of stabilisation policies and targets were still on the right track, including increasing dwindling forex reserves.
Central bank reserves stand at $8.6 billion, regardless of the influx of $1.12 billion in IMF funding in late August, which are just enough for approximately per month of imports. The end-year target was to improve the buffer around 2.2 months.
He said Pakistan it’s still in a position to increase reserves by around $4 billion, even though the floods hurt the existing balance by $4 billion in more imports, such as for example cotton, and a poor effect on exports.
However, he estimated the existing account deficit won’t increase by a lot more than $2 billion following floods.
Yes, there’s been substantial loss to the poorest people and their lives won’t be produced whole again. However in terms of servicing our external and local debt, and being micro- macro-economically stable, those ideas are in order.
December payment to be met
He said global markets were jittery about Pakistan, given the economy had suffered at the very least $18 billion in losses following the floods, that could go as high as $30 billion.
Yes, our credit default risk went up, our bond prices have fallen. ButI think within 15 to 20 days, the marketplace will normalise, and I believe will recognize that Pakistan is focused on being prudent.
Pakistans next big payment $1 billion in international bonds arrives in December, and Ismail said that payment would absolutely be met.
The IMF said on Sunday that it’ll use the international community to aid Pakistans relief and reconstruction efforts and the endeavour to make sure sustainability and stability.
Ismail said external financing sources were secured, including over $4 billion from the Asian Development Bank (ADB), Asian Infrastructure Investment Bank and World Bank.
This consists of $1.5 billion the following month from ADB beneath the Countercyclical Support Facility a budget support instrument.
The minister also said about $5 billion in investments from Qatar, the UAE and Saudi Arabia would materialise in today’s financial year.
The three announced fascination with buying Pakistan earlier this season, but no timelines or exact plans have already been reported yet.
He said $1 billion in UAE investment will certainly materialise within the next month or two by means of purchases in the Pakistan currency markets.
Some $3 billion in Qatari investment pledges will all come within the financial year to June 2023, he added.
Theyre considering the three airports in Pakistan, Karachi, Lahore and Islamabad long-term leases. Theyre also considering buying two plants that operate on LNG (liquefied gas) those I believe will most likely happen this twelve months, he said.
He said if the $3 billion figure had not been reached because the financial year closed, the rest of the amount would go in to the currency markets.
He also said Saudi Arabias crown prince had assured Prime Minister Shehbaz Sharif that Riyadh would invest $1 billion before December.
Pakistans central bank announced on Sunday that Saudi Arabias development authority had also extended a deposit of $3 billion, to mature in December, by twelve months.
He said a legal instrument would be signed soon with an agreeable country to activate a $1 billion deferred payment facility for oil.
(Reporting by Gibran Peshimam; Editing by Andrew Cawthorne)