Pakistan Considers Bilateral Debt Restructuring
Pakistan’s Finance Minister Ishaq Dar announced on Saturday that the country is exploring the possibility of restructuring its bilateral debt, regardless of the outcome of its International Monetary Fund (IMF) review. Dar stated that Pakistan will engage with its bilateral creditors, but will not approach Paris Club nation creditors or seek haircuts.
Debt Restructuring Options on the Table
As Pakistan continues discussions with the IMF regarding its stalled bailout funds, the government is considering whether to restructure or reprofile its debt. Dar emphasized that regardless of the approach taken, Pakistan will engage in talks with its bilateral creditors.
Successful Overcoming of Economic Vulnerability
According to Dar, Pakistan has successfully overcome economic vulnerability, leading to a halt in further decline. He referred to the release of the budget for the 2023-24 financial year as evidence of the country’s progress.
IMF Program and Economic Growth
Pakistan’s IMF program is set to expire this month, with approximately $2.5 billion in funds yet to be released. The country is facing challenges such as record inflation, fiscal imbalances, and critically low reserves that cover only a month’s worth of imports. Bilateral creditors accounted for $37 billion of Pakistan’s debt in the fiscal year 2021, with China holding $23 billion of the total amount.
Realistic Economic Growth Target
Dar considers the projection of 3.5% economic growth in the government’s budget for the year ending in June 2024 as a realistic target, despite being on the lower side. He expressed hope that Pakistan would pass its next IMF review, which would be the country’s ninth. However, he expressed skepticism about clearing future reviews.
Efforts to Reverse Economic Losses
The coalition government’s primary objective is to reverse economic losses and achieve economic indicators similar to those of 2017. To accomplish this, the government aims to implement the Public Sector Development Program (PSDP) effectively, which Dar believes can lead to a 3.5% growth rate, improved macroeconomic indicators, reduced inflation, and increased job opportunities.
No Default, Focus on Self-Sufficiency
Dar assured that Pakistan will not default and emphasized the government’s plan to make the country self-sufficient. While debt restructuring or write-offs are not currently on the table, negotiations for extending repayment periods may be explored at a later date.
Published in PakWeb, June 11th, 2023.
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