The finance minister, Ishaq Dar, announced that he would prefer to restructure $27 billion in non-Paris Club debt, but that he will not seek haircuts as part of any restructuring.
Dar ruled out a default on the country’s debt, an extension of the maturity date for bonds due in December, and renegotiation of the present International Monetary Fund programme in an interview with Reuters.
Foreign donors and multilateral development institutions, according to the minister, have been “extremely flexible” in finding ways to pay the country’s expected $32 billion in external financial obligations as a result of the terrible floods.
He speculated that part of this may be due to the repurposing of funds from development loans that had already been issued but were paying off slowly.
Dar, who is attending the IMF and World Bank annual meetings little over two weeks after taking office, indicated that Pakistan will seek restructuring on comparable conditions for all bilateral creditors.
When asked whether he thought it would be difficult to persuade China, the creditor for around $23 billion of the debt, to join, he declined to comment.
if Pakistan would try to reduce the principal of the loan, he said, “Rescheduling is OK, but a haircut is not what we need.” That is unjust.”
When asked if he had mentioned the possibility of middle-income countries borrowing from the IMF’s new Resilience and Sustainability Trust, Dar said, “We have investigated all possibilities.”
The country, which has been devastated by flooding and may need to import up to 500,000 tonnes of wheat over the next year, may profit from the IMF’s new emergency “food shock” borrowing window, according to the minister. In this situation, we may approach and access this facility, he said.
Finance Minister Ishaq Dar promises IMF adjustments as flood damage exceeds $16 billion.
The finance minister has promised to hold international lenders accountable for economic changes. He also said that a flood donors’ meeting promised by French President Emmanuel Macron will be held the following month, and that he hoped it would help Pakistan’s short- and long-term needs.
The IMF handed $1.1 billion to Pakistan in late August as part of a $6 billion arrangement agreed upon in 2019 as Prime Minister Shehbaz Sharif’s new administration pushed reforms.
Dar told AFP on Friday night in Washington that “it would be our endeavour, even at the sacrifice of extra labour, to fulfil the plan efficiently.”
This, he said, “sends a positive signal to the international community and the markets,” and he commended other nations for their “very quick” offers to assist Pakistan.
Ishaq Dar acknowledged the political risks, stating that some of his friends have proposed that Imran Khan continue in government for the duration of the economic crisis. “A political approach would have served no use.”
According to a recent study financed in part by the World Bank and the Asian Development Bank, Pakistan sustained $32.4 billion in flood losses and would require $16.2 billion in restoration and rehabilitation.
“With that problem, certainly, we have to go back to the drawing board,” he said of deciding how to allocate monies.
Minor adjustments may be necessary, he continued, but “all is in order” for the IMF’s impending evaluation, which may result in extra money being made available.
Ishaq Dar added that he expected Macron’s donor conference to take place in November and expressed optimism that it would address needs that went beyond the three to four years normally envisaged for speedy disaster recovery.
Due to the floods, inflation, and the country’s financial troubles, the World Bank reduced its growth prediction for Pakistan earlier this month, expecting the economy to grow by only 2% year on year through June.
Dar expected 3% growth while remaining uncritical of the World Bank’s strategy.
“I think things are already cooling down,” he said, “but I don’t rule out the consequences of international crises.”