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Pakistan

Despite challenges, Pakistan to avert default: report

  • KTrade report says Pakistan's commercial debt obligations are low, can be handled by careful management of current account balance and support of friendly countries
Published May 23, 2023

Despite facing one of the worst economic challenges in decades and a continuous delay in resumption of the International Monetary Fund (IMF) programme, some economic experts remain confident that Pakistan would avert a likely default.

“Contrary to the pessimistic sentiment, we think Pakistan will not default on its sovereign debt,” said Ali Farid Khwaja, Chairman KTrade, a brokerage house, in a report titled KTrade Strategy Report: We are Bullish on Pakistan.

The report was of the view that Pakistan’s commercial debt obligations are very low - $3 billion due over the next 12 months. “We think this can be managed by careful management of the current account balance and by support of friendly countries,” the report noted.

“We think Pakistan will be able to raise these funds from friendly countries, such as Saudi Arabia and China,” it added.

The remarks come as Pakistan and the IMF remain in talks for the resumption of the multi-billion dollar programme, which has been stalled since November last year.

Meanwhile, KTrade was of the view that Pakistan could have maintained compliance with IMF’s plan conditionality much earlier, had it not been for “deliberate missteps taken for short term political benefits”.

“Similarly, the investment flows from friendly countries could have materialized earlier if there was no political instability. This is why we believe that domestic politics has been the main culprit for the economic woes,” it said.

However, “the recent progress shows that the government still has sufficient controls and access to tools, which can be used to manage the crisis,” it said.

KTrade said that the recent government measures taken to control the current account are not long-term fixes.

Federal budget on June 9: Govt will fulfil all external obligations: Dar

However, “we think that they would be sufficient to manage the liquidity problem. This will give time to the government for finalizing investment terms with countries, such as UAE, Qatar, and most importantly, with China and Saudi Arabia,” it added.

Last week, brokerage house Arif Habib Limited in a report titled ‘Pakistan Economy: What if Pakistan defaults?’ expressed concern that Pakistan’s default risk has risen considerably amid lack of breakthrough with the IMF.

“Given support from friendly countries is often tied to IMF’s tacit approval, a lack of breakthrough with the fund would make sovereign default a very high probability. While our base case assumption is that Pakistan will avert default by remaining engaged with the IMF along with support from major bilateral creditors, sovereign default nonetheless remains a real possibility,” AHL said.

Comments

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Rizwan May 23, 2023 02:37pm
Pakistan can be many things but one thing is for sure it is a tough resilient country which can overcome many challenges. Other countries would fall.
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Asif May 23, 2023 04:09pm
@Rizwan , Only if the army can stay within its constitutional role - then everything is indeed possible.
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Az_Iz May 23, 2023 04:42pm
@Rizwan , very well said.
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Haq May 23, 2023 06:42pm
Alhamdolillah, govt should get rid of IMF (once in for all), resize it's structure, eradicate corruption, provide relief to common people, adopt simplicity, cut expenditure, adopt business friendly policies, dispose off loss making SOEs, promote agriculture (natural farming), revert back to Islamic ideology, to made Pakistan a true Islamic Welfare State
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Az_Iz May 24, 2023 01:19am
Overcoming challenges is what makes a country stronger.
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Comedy May 24, 2023 02:18am
@Haq, Would you like fries with that?
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Az_Iz May 24, 2023 02:27am
With natural disasters and a commodity inflation throughout the world, this has been a challenging year for the country. If the country can see through this, it should emerge stronger. Let’s hope, it can emerge from this, having learnt to stand on its own. So every can be proud.
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KhanRA May 24, 2023 05:08am
Ali Farid Khwaja is very intelligent (was a Rhodes Scholar at Oxford), but even intelligent people can be wrong .
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Hilarious May 24, 2023 06:48am
@Haq, hahahaha wait you’re being serious, let me laugh even harder, HAHAHAHAHA. The same people responsible for getting you to this stage, and you still have faith in them to get you out of it, what part of a “majority of their wealth is outside the country” is hard to grasp? They’ve never worked for you, they never will work for you, they work for the betterment of themselves, any benefit that comes to the country is simply by accident.
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Ali May 25, 2023 10:42pm
Many people blame the army for everything, when IK was PM he didn't say anything about the army instead praised it. The moment he got removed he started to speak against the army and blamed everything on the army, this is the reason why many Pakistanis are brainwashed and it is sad to see this happen.
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