The State Bank of Pakistan (SBP) has no plans for restructuring bilateral debts, Governor Jameel Ahmed said at a press conference following the announcement of the monetary policy on Monday.
“Absolutely no doubt about it. We are not considering any such plan; so there is no question of what will be the haircut,” he said during a briefing to analysts after Monday’s market review.
Finance Minister Ishaq Dar claimed on Saturday that the government was doing work on restructuring its bilateral debt in the background, the central bank is completely unaware of any such plans as per SBP Governor Jameel Ahmed’s remarks from yesterday.
According to some analysts who attended the post-budget conference on Saturday, the finance minister may have been referring to the rollover and extension of the tenure of bilateral obligations.
Pertinently, Pakistan owes $4 billion to China, $3 billion to Saudi Arabia, and $2 billion to the United Arab Emirates. Each year, this amount is rolled over, and the government negotiates with these governments for the rollover. In any case, the country can work with creditors like the ones mentioned above to extend its debt for another two or three years. Because Pakistan is required to pay interest on these bilateral loans, its terms will most likely be extended.
Pakistan needs to undergo an extensive debt restructuring exercise given the scale of debt servicing requirements over the next 2-3 years. According to a recent report by Arif Habib Limited, the total public external debt outstanding as of March 2023 is USD 96 billion (28 percent of GDP) out of which USD 37 billion relates to multilateral creditors likely to be excluded from any debt restructuring exercise.
Pakistan needs to timely engage in separate negotiations with China, and other bilateral creditors, but mostly China since it has funded 30 percent of the country’s $96 billion external debt. Also, Beijing is likely to be a key player to bail out Pakistan in case of default.
