Finance Minister Dar says Pakistan will not default

F.P. Report

ISLAMABAD: Finance Minister Ishaq Dar Saturday said Pakistan will not default and would meet its upcoming $1 billion dollar bond payments.

Dar’s statement came amid the rumours surrounding oil shortage and widening credit default swap, and termed them “baseless rumours being spread on political goals.

Addressing a press conference via video link from Islamabad, Dar said that there were rumours that the country would not be able to pay $1b on December 5 against the maturity of five-year sukuk, or Islamic bonds.

“We have never defaulted before. We will not even be close to default … Let me clear this categorically that the bond will be paid and there is no delay in this and even arrangements have been made in principal for upcoming payments in the next year,” he said.

Pakistan’s default risk as measured by five-year credit-default swaps (CDS) — insurance contracts that protect an investor against a default — soared by 1,929 basis points (bps) to 7,550bps on November 17, according to data provided by research firm Arif Habib Limited.

Pakistan is scheduled to pay $1 billion on December 5 against the maturity of five-year Sukuk, or Islamic bonds. The finance minister has repeatedly assured Sukuk payment, but the international market is not ready to rely on assurances as the country’s economy struggles to avoid default by borrowing more from the markets, donors, commercial banks and friendly countries.

The recent increase in the CDS reflected a grave situation, making it increasingly difficult for the government to raise foreign exchange from markets either through bonds or commercial borrowings.

Dar said that no one should worry about the rumours, claiming they were being spread seemingly for political purposes. “This is highly irresponsible behaviour,” he added.

Dar said that another rumour was spread about Pakistan’s credit default swap. “Our international bonds have very small transactions … and technically there should be no impact on them,” he added.

The finance minister said that people should desist from speculation about increased risk, saying that such “irresponsible statements” would hurt the country and should be avoided.

He said there was another rumour spread about fuel reserves depleting in the next few days. “There is nothing like this. The reserves are present at the level they should be and there is no need for worry,” Dar explained, once again calling for rumours to be avoided.

Regarding the current account deficit, Dar said it was under strict watch and being monitored and managed for the national interest. He said it was $316 million in September and was expected to be below $400m in October.

“If this continues at the same pace then it will be around $5-6bn for the year [while] the projected was $12bn,” the finance minister said.

He once again said that the country came prior to any political affiliation and requested people to avoid rumours about the economy and issue statements with responsibility. “Your statements have an effect and as a result queries come.”

He reiterated that everything was in order and that bond payments would be made on time in the first week of December.