Ishaq Dar: Pakistan won’t default even without an IMF loan.
In a recent speech at the Islamabad Security Dialogue, Pakistan’s Minister for Finance and Revenue, Ishaq Dar, addressed concerns about Pakistan’s ability to meet its debt obligations amidst the delay in signing a staff-level agreement with the International Monetary Fund (IMF) for the release of a crucial economic bailout.
Dar stated that Pakistan would not default on its debt obligations of $3.7 billion by June, even if the IMF loan program remains stalled. He also urged international rating agencies not to discuss Pakistan’s default, saying that financing would be arranged for payments in the current fiscal year as friendly countries had promised help.
Despite Dar’s reassurances, Moody’s Investor Service recently warned that Pakistan could default without an IMF program, as its foreign exchange reserves were “very weak.” Similarly, Fitch Ratings said that default or debt restructuring was an “increasingly real possibility” for Pakistan. Analysts say that the country is on the brink of default as its foreign reserves continue to remain at a critical level, even though it has secured financing support from China, Middle East countries.
For the past six months, Pakistan has been engaged in negotiations to renew a $6.5 billion bailout package with the International Monetary Fund (IMF) due to mounting pressure on its foreign exchange reserves, which currently only cover imports for one month. In an effort to secure IMF funding, the government has implemented several measures such as lifting caps on exchange rates, imposing taxes, increasing energy tariffs, and reducing subsidies. Additionally, the government has raised key interest rates to an all-time high of 21%. Pakistan is currently reeling from an economic crisis, with inflation surging to 36.4%, the highest in its history and the highest in South Asia.
In his speech, Dar stated that Pakistan had fulfilled all conditions and taken steps towards reaching an agreement with the international lender for reviving the stalled loan program. He added that technical discussions with the IMF ended on February 9, and there was a “gap” on the matter of the external account. The external debt repayments in May and June would be done on time.
Dar also urged an end to international politics based on injustice with Pakistan, saying that “internationally, people are amazed at how Pakistan is managing.” He said that rumors about Pakistan defaulting on its debt obligations should not be spread, and international rating agencies should not discuss Pakistan’s default.
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Dar has reassured the public that Pakistan would not default on its debt obligations, even if the stalled loan program with the IMF is not revived, analysts remain cautious. The country’s foreign reserves remain at a critical level, and international rating agencies have warned of the possibility of default or debt restructuring. Pakistan has taken steps to secure financing support from countries in the Middle East and China, but unlocking IMF funding remains crucial. Pakistan is currently facing an economic crisis, with high inflation and a bruising political battle. Dar’s call for an end to international politics based on injustice highlights the challenges Pakistan faces, and the need for greater international support to help the country overcome its economic difficulties.
