Seek no help from commercial banks: Miftah
Pakistan’s finance minister said on Friday the South Asian nation was seeking debt relief from bilateral creditors following devastating floods, but stressed the government would not seek relief from commercial banks or the creditor. of Eurobond.
Pakistani bonds had fallen to half face value throughout the day after the FinancialTimes said a United Nations development agency was urging the cash-strapped country to restructure its debt.
Devastating floods engulfed large swaths of Pakistan this month, killing more than 1,500 people and causing damage estimated at $30 billion, stoking fears that Pakistan could not meet its debts.
“In view of the climate-induced disaster in Pakistan, we are requesting debt relief from bilateral Paris Club creditors,” Finance Minister Miftah Ismail said in a Tweet. “We do not seek or need relief from commercial banks or Eurobond creditors.” According to the Financial Times, a memorandum the United Nations Development Program (UNDP) is due to deliver to the Pakistani government this week says its creditors should consider debt relief following the floods.
The memorandum further proposed debt restructuring or swaps, in which creditors would forego certain repayments in exchange for Pakistan’s agreement to invest in climate-resilient infrastructure, according to the newspaper.
Neither the foreign office in Islamabad nor a UNDP spokesperson in Pakistan immediately responded to Reuters‘ request for comments on the memorandum. The country’s finance and information ministers could also not be reached.
The bond market’s reaction on Friday heightened fears of another Pakistani default, hammering its public debt on the international market. One of the major sovereign bonds due in 2024 fell more than 10 cents to around 50 cents on the dollar, while another due in 2027 fell to around 45 cents.
Read more: Flood-hit Pakistan should suspend debt repayments, says UN document
Miftah Ismail had said in an interview with Reuters earlier this week that there was no chance of credit default risk.
The government must pay $1 billion on bonds maturing in December. It has interest payments worth around $0.6 billion for the 2022-23 fiscal year, but the next full bond repayment isn’t until April 2024. Miftah said in the Tweet from Friday that the $1 billion bond would be paid on time and in full.
Prime Minister Shehbaz Sharif also called on wealthy countries for immediate debt relief on Friday, saying what had been done was commendable but adding: “It falls far short of meeting our needs.”
Sharif, who with Ismail is in New York to attend the United Nations General Assembly, told Bloomberg TV that Pakistan has discussed debt relief with UN Secretary General Antonio Guterres and world leaders.
“We have spoken to European leaders and other leaders to help us in the Paris club, to get us a moratorium,” he said, referring to rich country creditors.
Sharif and Finance Minister Ismail said they had also taken up the issue of aid with the International Monetary Fund and the World Bank.
Ismail said the IMF had “almost accepted” the request to ease the conditions of Pakistan’s $7 billion program which resumed in July after being delayed for months.
“They almost said yes,” he told local Pakistanis News from Dunya TV in New York a day after Sharif met the Managing Director of the IMF.
The IMF representative in Islamabad did not respond to a request for comment.
The country of 220 million could not stand on its own, Sharif added, “unless we get substantial relief”.
He said Pakistan would also seek relief from longtime ally China, to which it owes about 30% of its external debt.
The Pakistani government and António Guterres attributed the floods to climate change.