Pakistan’s dollar bonds fell on Friday after Prime Minister Shehbaz Sharif made an urgent appeal for debt relief from the rich countries in the wake of one of the worst floods in the country’s history.
Pakistan’s 5.625 percent 2022 dollar bond, set to mature in December, dropped 11 cents on the dollar. Similarly, the 7.375 percent 2031 dollar bond going down by 7 cents on the dollar, Bloomberg said in a report.
Financial Times also reported today that a United Nations development agency has urged the cash-strapped country to restructure its debt.
Pakistan is not the only country struggling to service its heavy debt, a number of other emerging and frontier-market nations are also struggling as their currencies weaken against the US dollar, and borrowing costs soar.
Pakistan’s problems have been compounded by the devastating floods that have affected over 33 million people. About 81 districts in Sindh, Punjab, Balochistan, and Khyber Pakhtunkhwa have been officially notified as ‘calamity hit’ with over 1,600 dead since June 14th, according to the latest data released by the National Disaster Management Authority (NDMA).
However, Finance Minister Miftah Ismail clarified in a tweet that the country is only seeking debt relief from bilateral Paris Club creditors. The minister said that Pakistan is neither seeking nor it needs any relief from commercial banks or Eurobond creditors.
1. Given the climate-induced disaster in Pakistan, we are seeking debt relief from bilateral Paris Club creditors. We are neither seeking, nor do we need, any relief from commercial banks or Eurobond creditors. We have a $1 bn bond due in December which we will pay on time and
— Miftah Ismail (@MiftahIsmail) September 23, 2022
In a follow up tweet, he mentioned that Pakistan is servicing all its commercial debt and will continue to do so.
Barclays Bank in its recent report had said that the economic damage caused by the recent floods, the evolving political crisis, and increasing doubts about the nation’s ability to meet International Monetary Fund (IMF) targets could make it more difficult to manage the debt burden.
The report said that roughly $15.6 billion of Pakistan’s foreign-currency debt is due in FY23 but the funding gap is likely to be around $6 billion given that official creditors (non-IMF) are expected to roll over $9.5 billion. The FY23 budget has earmarked $1.5 billion for Eurobond issuance but refinancing plans for the remaining $4.5 billion are not available.