Debt finance

Finance minister says Pakistan won’t ‘default’ on foreign debt as currency falls to new low

ISLAMABAD: Despite the loss of foreign exchange reserves and the “pressure” on the national currency, the country will not “default” on its external debt, according to the Pakistani Minister of Finance, Miftah Ismail. The price of the Pakistani rupee hit a record low of 232.92 against the US dollar at the end of Tuesday’s session.

The finance minister, who was appointed a member of Prime Minister Shehbaz Sharif’s cabinet in April, said that over the next three months the government would “moderate” imports while trying to boost exports.

In addition, he noted that “revision” imports may have contributed to a reduction in the current account deficit (CAD), which he estimated at around $10 billion. In addition to cleaning up the finances, we aim to reduce the CAD to zero to close the current account deficit.

The minister also said that over the next 12 months, Islamabad will pay about $21 billion in external obligations.
He also said Pakistan owed a total of $81 billion to foreign creditors, most of which were bilateral lenders such as Saudi Arabia, the United Arab Emirates and China.

In addition to the 800 billion rupees ($3.37 billion) in fuel levies, the finance minister said the government plans to raise 775 billion Pakistani rupees ($3.27 billion) in fuel revenue. export during the current fiscal year. Furthermore, he explained that the government’s decision to end fuel subsidies was justified as the price of petrol and diesel has increased by about a third since the Sharif administration came to power.

The minister also defended the government’s option to end subsidies for petrol and diesel, the prices of which have risen by almost a third since the Sharif administration came to power.

He claimed the International Monetary Fund (IMF) had similar demands before reaching an employee-level agreement (SLA) with Islamabad this month, which included the elimination of fuel and electricity subsidies.

He said the International Monetary Fund (IMF) also imposed the elimination of fuel and electricity subsidies this month before an employee-level agreement was reached with Islamabad.

Subject to IMF executive board approval, the IMF has agreed to release a tranche of $1.1 billion under an expanded financing facility (EFF), according to reports. According to Ismail, the Washington-based lender will donate a total of $4 billion over the next 12 months.

Rising commodity prices, including a sharp rise in the price of crude oil in the international market, have aggravated Pakistan’s economic crisis, which has worsened in recent times.

Major rating agencies like Fitch and Moody’s recently updated their growth projections for the country. Last week, Fitch changed its forecast from “stable” to “negative”.

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