Pakistan Gets Relief As Creditors Agree To Roll Over Debt

 

Pakistan received some relief as its key bilateral creditors agreed to roll over $12 billion worth of debt China Saudi Arabia and the UAE agreed to extend the loans for one more year as requested by Islamabad This was an important precondition for the IMF to approve Pakistan new bailout package Finance Minister Muhammad Aurangzeb stated that the IMF Executive Board is now scheduled to meet on August 28th and sanction $7 billion in loans Rolling over existing debt with bilateral partners helped secure new funding support.  

The rolling over of $12 billion in debt by the three nations provided Pakistan more fiscal space It avoided debt repayments for one year which eases pressure on foreign exchange reserves Aurangzeb said reserves have strengthened compared to a year ago so there was no need to seek higher interest rates from creditors He hoped Pakistan rating could improve to a stable B grade by end 2022 allowing access to international bond markets at lower rates.

As another positive, the Finance Minister noted ratings agency Fitch upgrading Pakistan outlook last week And the State Bank cutting interest rates recently would aid economic stability goals However only securing three year roll overs could provide more comfort to the IMF Long term agreements help stability programs. Pakistan also received an offer from Standard Chartered Bank but was waiting for IMF approval to negotiate interest rates down from double digits.

On the domestic front the government aims to expand the privatization program and trim non essential ministries in line with the 18th Amendment This right sizing seeks to reduce spending Aurangzeb mentioned discussions with China to arrange a Panda bond this year and hire more Chinese advisors to extend energy cooperation deals Switching power plants from imported to local coal also aims to ease constraints.

Rolling over Pakistan bilateral debt through cooperation from traditional partners like China KSA and the UAE delivered a prerequisite for the IMF program This temporary debt service suspension and new financing will alleviate some economic concerns But long term reforms are essential to improve creditworthiness and boost growth and employment over the coming years.