The government is looking into rescheduling of its external debts to avert the default risk as the country faces a challenge to service $66 billion of the total foreign public and publicly guaranteed payments in the next five fiscal years.
This option of rescheduling was discussed during a meeting held on Monday in the Ministry of Economic Affairs, sources told the Express Tribune. The meeting was attended by the Federal Minister of Economic Affairs, Sardar Ayaz Sadiq and Minister of State for Finance, Dr. Aisha Pasha.
After deliberation over the topic, the Ministries decided that rescheduling the debt was not the best option as external public debt did not qualify for rescheduling until a default was declared. It was further concluded that if the government was to reschedule the debt it would be equivalent to declaring default, sources added.
Dr. Aisha claimed that the finance ministry is opposing any debt rescheduling and the collaboration with the Economic Affairs Ministry was to find ways to enhance disbursements of already signed loans and searching new windows for additional financial support to meet the financing requirements.
However, the monthly debt bulletin report showed that the government has been struggling to find financial support from friendly countries despite its countless claims. During the month of July, the government has only arranged $179 million worth of loans from which $100 million was on account of the Saudi oil facility with deferred payments. The Asian Development Bank (ADB) also made a disbursement of $65 million during the previous month.
Nevertheless, the meeting highlighted that only $16 billion in external public and publicly guaranteed debt could be rescheduled which was largely financed by China only, sources added. Pakistan owes $26.8 billion to China on account of bilateral and guaranteed debt, and the debt servicing of the loans would amount to $5.3 billion during the next five FYs.
It is to be noted that Chinese loan servicing on commercial loans can not be rescheduled and is excluded from the aforementioned amounts.
Further, Pakistan’s non-concessional commercial debt stock amounts to $25.3 billion on account of bonds, cash deposits and commercial loans for which $36.5 billion in debt servicing is required in the next five years. This includes $8.8 billion on sovereign bonds, $7 billion in cash deposits and $9.5 billion worth of commercial loans.
The meeting was informed that the multilateral creditors did not offer to reschedule until the country declared itself as a highly indebted and poor country (HIPC), which was equivalent to declaring default, sources say. Similarly, Paris Club is offering rescheduling under the G-20 Common Framework however, it requires rescheduling of commercial loans in addition to bilateral debt.
Therefore, the meeting decided to rule out this option as well.
