Pakistan is planning to engage with bilateral creditors and rescheduling debt as the country faces financial challenges in the wake of devastating floods and subsequent disease outbreaks. Finance Ministry sources said this. Pakistan’s Finance Minister Ishaq Dar has also said that he will put forward the proposal for debt rescheduling. He said the balance between rising financial needs and maintaining credit would be tied up with timely payments to commercial and Paris Club lenders.
“We look forward to bilateral debt rescheduling,” he said.
“We expect to bring back economic normalcy in the next six months and then move on to the international capital markets,” Dar said.
Pakistan has an external debt of $ 97 billion, of which bilateral debt is $20.3 billion. As per the plans of the Finance Ministry, Pakistan could get around $2 billion in debt in the current fiscal if the bilateral creditors agree to roll over their respective debt.
Pakistan’s efforts will be tilted towards China, as out of $20.3 billion in bilateral debt, China’s debt amounts to about $9.7 billion, which is 48 percent of the total principal loan amount.
The move comes after Islamabad was advised by western creditors to reschedule foreign loans from China.
However, the finance minister believes that if the government can arrange $34 billion, it can certainly raise another $1.2 billion, which is the amount to be paid to the Paris club in the current fiscal.
On the other hand, the International Monetary Fund (IMF) has estimated Pakistan’s financial needs to be around $40 billion.
Dar said the cost of Paris Club loan rescheduling outweighs its benefits.
However, Moody’s credit rating agency recently downgraded the country’s rating from CAA1, making Pakistan’s public debt extremely risky.
But Dar appears optimistic that the government has already found a plan to raise debt through Eurobonds, saying he will move to capital markets only when the economic infrastructure is strong.