Pakistan bonds advance after Zambia clinches debt restructuring deal: report

Pakistan’s dollar bonds registered significant improvement as sentiment for distressed debt boosted after Zambia clinched a deal with bilateral creditors, reported Bloomberg on Friday.

“Pakistan’s 8.25% 2024 bond was indicated climbing half a cent to about 50 cents on the dollar,” reported Bloomberg, adding that “Sri Lankan’s 7.55% 2030 bond is indicated trading at 38.7 cents on the dollar, the highest in over a year”.

Zambia seals $6.3bn restructuring in breakthrough for developing nations

The development comes a day after Zambia inked a deal to restructure more than $6 billion in bilateral debts, in a long-awaited breakthrough to ease pressure on the southern African country.

Zambia is viewed as a test case for a debt restructuring framework backed by the Group of 20 wealthy nations intended to streamline relief for countries caught in a developing world debt crisis sparked in part by the coronavirus pandemic.

In 2020, Zambia became the first African country to default on its sovereign debt during the COVID-19 pandemic and has struggled since in protracted negotiations to agree to a deal on the $12.8 billion of external debt it was trying to restructure.

Debt restructuring has lately become a hot topic in Pakistan as economic experts have been voicing their support and concerns on the said measure.

However, those in charge have denied that any such measure is in the offing.

Pakistan not interested in bilateral debt restructuring

Last week, State Bank of Pakistan (SBP) governor Jameel Ahmad said the country is not considering a bilateral debt restructuring, sources that attended an analyst briefing following the monetary policy decision told Reuters.

“As of now there is no plan to enter into any debt restructuring,” the sources cited central bank governor Jameel Ahmad as saying.

“Absolutely no doubt about it. We are not considering any such plan, so there is no question of what will be the haircut,” he added.

In his post-budget press conference, Finance Minister Ishaq Dar had said that the government is working on the possibility of restructuring its bilateral debt.

“There is no plan to go to multilateral development institutions, requesting them to reschedule our debt,” he said.

“However, we could negotiate bilateral loans and will talk to our bilateral partners after the budget process is over,” he said.

Dar also ruled out the need to reschedule domestic debt.

“Being a sovereign country, if you cannot meet your own currency requirement of the debt repayment, it is a serious situation,” he said at the press conference.