Denies rumors of defaulting on bonds, shortage of fuel
ISLAMABAD
Federal Finance Minister Ishaq Dar on Saturday assured that Pakistan would meet all of its international payment commitments, including Sukkuk bonds, apart from managing all other constraints such as fuel stocks and current account deficit.
In a televised statement from the Finance Division on Saturday afternoon, Dar said that there were certain rumors surrounding the economy which were doing the rounds recently.
He said that spreading irresponsible rumors posed the real danger to the country as he pointed to Islamabad’s track record of always meeting payment deadlines and not defaulting. “Our first priority is the country, and any political party affiliation came after that.”
The first rumor, he said, pertained to the payment of an Islamic Sukuk bond called Euro Bond when it matures in the first week of December. He said that some people were claiming that Pakistan was not in a position to pay the billion-dollar bond.
However, he assured that the country would meet all financial obligations on time and that the bond would be paid on the day it matures.
The other rumor, he said, pertained to the Credit Default Swap and that the risk for repayment had increased to 75%.
Dar rubbished this, stating that this was not the case.
On the current account deficit, Dar said that it was being managed and that it remained within a manageable range. He said that for September, the current account deficit remained at around $316 million.
For October, it was less than $400 million. “If it maintains this rate, the current account deficit stood at $5 billion to $6 billion, down from the projected level of $12 billion,” he said, adding that the current account was something they were keeping a very keen eye on and were managing various aspects of it.
On the shortage of fuel stocks, Dar again refuted the rumors, assuring that there will be no shortage of the essential fuel such as petrol and diesel.
Pakistan’s default risk as measured by five-year credit-default swaps (CDS) — insurance contracts that protect an investor against a default — soared by 1,929 basis points (bps) to 7,550bps on November 17, according to data provided by research firm Arif Habib Limited.
Pakistan is scheduled to pay $1 billion on December 5 against the maturity of five-year Sukuk, or Islamic bonds. The finance minister has repeatedly assured Sukuk payment, but the international market is notready to rely on assurances as the country’s economy struggles to avoid default by borrowing more from the markets, donors, commercial banks and friendly countries.
The recent increase in the CDS reflected a grave situation, making it increasingly difficult for the government to raise foreign exchange from markets either through bonds or commercial borrowings.
