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Dar looks to calm nerves, says Pakistan will not default on bond payments

  • Finance minister reiterates country will meet international payment obligations, also dismisses rumours of looming fuel shortage
Published November 19, 2022
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Federal Minister for Finance and Revenue Ishaq Dar on Saturday said Pakistan will not default on its payments, and would meet its international obligations, a statement that comes as the country's perceived risk increased in recent days.

In a video message, Dar said rumours were circulating that Pakistan would not be able to pay $1 billion on December 5 against the maturity of a five-year Sukuk, or Islamic bond.

“Pakistan has never defaulted ... I want to categorically state that the bond will be paid, and there is no delay,” said Dar.

“Moreover, in-principal arrangements have been made for payments in the coming year,” he added.

Dar also brushed off rumours over Pakistan's perceived risk of default, measured by the 5-year credit default swap (CDS), which hit 75.5% on November 15, 2022.

“Rumours were spread on a political basis pertaining to the CDS, which need to be avoided,” he said. “This is a massive injustice with Pakistan,” he said.

Dar informed Pakistan’s international bonds are very small transactions, “and technically there should be no impact on them”.

Pakistan's 5-Year CDS increased from 5,620bps on November 14 to 7,550bps on November 15, an increase of 1,929.6bps. The increase comes in tandem with falling foreign exchange reserves held by the State Bank of Pakistan (SBP) that clocked in $7.96 billion as of November 11, 2022, according to data released on Thursday. Total liquid foreign reserves held by the country stood at $13.8 billion.

Meanwhile, Dar also dismissed rumours of a looming fuel shortage.

“Rumours regarding shortage of petroleum products were also spread. We have sufficient petroleum reserves to meet the country’s requirements,” said Dar.

The finance minister said that such rumours should be avoided, as it has caused concern among masses including international financial institutions.

“Fourthly, it is being said that the current account deficit would reach its peak and become unmanageable by the end of this year. I would like to state that there are no such concerns, we are keeping a vigilant eye. It is being managed in a professional manner."

The federal minister said that CAD in September clocked in at $316 million, and in October it is expected to be below $400 million, which translates into $5-6 billion by the end of this year.

“Everything remains in order,” he said.

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