Next week, a further $1 billion is due.
ISLAMABAD:
In the midst of the government's difficult battle to prevent sovereign default with very little gross foreign exchange reserves left behind, Pakistan is expected to make debt repayments of over $1 billion to two foreign commercial banks early next month.
According to The Express Tribune's reporting on ministry of finance sources, the government will repay two loans to Gulf banks in the first week of January. In the hopes that the lenders would further postpone payments when the loans reached maturity, these loans had been secured for a year. However, poor credit ratings warning of a significant chance of default prevented foreign lenders from honouring their obligations to Pakistan.
Two separate repayments of $600 million and $415 million will be made to two Dubai-based business banks. These repayments are anticipated to significantly reduce the already vulnerable foreign exchange reserves, which are now valued at about $6 billion until new loans are arranged. Regarding this article, the Ministry of Finance made no comments.
Since the International Monetary Fund (IMF) did not confirm a mission visit that was ad hoc scheduled for October 26, Pakistan's economic problems have gotten worse. The likelihood of default has increased, and former finance minister Miftah Ismail has frequently stated that, in the absence of the IMF program, the nation might default.
But on Wednesday, Finance Minister Ishaq Dar fiercely asserted that Pakistan "would not fail" on its international obligations because the government has secured the $31-32 billion needed for the current fiscal year 2023.
The The gap between the black market and interbank rates has widened to between Rs25 and Rs30 per dollar.
According to information obtained by The Express Tribune, the $32 billion plan was overly optimistic to succeed in the absence of the IMF's protection. The government has included floating Eurobonds as a means of raising $1.5 billion as part of its external financing strategy. On account of Naya Pakistan Certificates, an additional net $300 million is anticipated (NPC).
The Ministry of Finance still expects $6.3 billion to materialise in the current fiscal year—a figure that likewise seems incredibly optimistic—instead of the over $7 billion in foreign commercial loans that were projected. The government is depending on China to renew its $3.5 billion in foreign commercial loans.
in addition to non-Chinese banks not repaying $1.3 billion in loans. A $700 million Chinese commercial loan that Islamabad had previously returned may reportedly arrive soon, according to the finance minister.
To date, however, neither Chinese nor non-Chinese commercial banks have extended loans because of the negative effects Pakistan's bad credit rating has had on their overall balance sheets.
The government projects that it will be able to obtain new $1.5 billion foreign commercial loans during the current fiscal year, but this prediction may not come to pass if the IMF programme is not revived. Today, foreign commercial banks are requesting interest rates that are substantially higher than 10%, which the government politically cannot accept.
The loans that Pakistan will be repaying next week were and non-Chinese banks not paying back $1.3 billion in loans. According to the finance ministry, a $700 million Chinese commercial loan that Islamabad had previously returned will arrive soon.
However, because Pakistan's poor credit rating has a negative effect on both Chinese and non-Chinese commercial banks' overall balance sheets, neither have offered loans thus far.
In the current fiscal year, the government projects that it will be able to get new foreign commercial loans totaling $1.5 billion, although this prediction may not come to pass if the IMF programme is not revived. The government cannot politically afford the interest rates that foreign commercial banks are currently requesting, which are significantly higher than 10%.
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