The governor of the State Bank of Pakistan (SBP), Jameel Ahmad, announced on Friday that Pakistan will pay back a $1 billion international bond three days before it is due. The impoverished nation is suffering from a severe economic downturn and the aftermath of fatal floods. Islamabad’s capacity to fulfil its obligations under external financing has thus been a source of some uncertainty.
According to Reuters, the bond repayment is due on December 5. Funding has reportedly been secured from bilateral and multilateral sources to ensure that repayments are made without having an impact on the nation’s foreign exchange reserves. As a result of inflows from foreign lenders, he continued, he also anticipates that external financing requirements would be met on schedule.
In spite of payments totaling at least $1.8 billion as of November 18, Pakistan’s reserves with the central bank were $7.8 billion. The SBP governor stated that the Asian Infrastructure Investment Bank was anticipated to provide an another $500 million infusion the following week. According to reports, he also expressed confidence in a ‘much larger’ reserve amount by the end of FY 2023, which is expected to occur in June.
The International Monetary Fund (IMF) earlier this week stated that it is crucial for the discussions and ongoing financial assistance from multilateral and bilateral partners that Pakistan’s recovery plans following the devastating floods are completed. This occurs in a time of weak economic growth and rising inflation, with the balance of payments being one of the main concerns.
The SBP also increased its main policy rate by 100 basis points to 16% on Friday in an unprecedented move to try to curb the price increase. Despite the fact that Pakistan has been a part of the IMF’s bailout programme since 2019, the date of the ninth review and money distribution is still undetermined. The political unrest in Pakistan brought on by the prolonged search for a new army chief, which has since been settled, contributed to the country’s economic difficulties in part.
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