Finance Minister Ishaq Dar dismisses rumours surrounding default, oil shortage

ISLAMABAD: Assuring the nation that Pakistan will not default, Finance Minister Ishaq Dar Saturday rejected all rumours related to the oil shortage and widening credit default swap, labelled them as "baseless speculation" being spread for a political agenda.

Addressing a press conference via video link, the finance minister asserted that Pakistan will “absolutely not” default on its debt obligations.

Country’s next big payment — $1 billion in international bonds — is due in December, and Dar assured the people that payment would be met on time.

“We have never defaulted before. We will not even be close to default … Let me clear this categorically that the bond will be paid and there is no delay in this and even arrangements have been made in principal for upcoming payments in the next year,” he reiterated.

Addressing the issue of widening credit deficit swap, Dar urged the people not to spread “unsubstantiated news” regarding the risk factor.

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 not ready 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.

However, addressing all these news reports, Dar said: “Our international bonds have very small transactions and technically there should be no impact on them.”

The finance minister said that people should desist from speculation about increased risk, saying that such “irresponsible statements” would hurt the country and should be avoided.

Commenting on the third issue which has become a cause of concern, the finance minister said that Pakistan has enough fuel reserves to meet the local demand.

“There is nothing like this. The reserves are present at the level they should be and there is no need for worry,” Dar clarified.

Earlier in the week, Oil and Regulatory Authority (OGRA) — in a brief statement issued — had revealed that the country has petrol and high-speed diesel reserves which are sufficient for 22 days and 19 days, respectively.

The regulatory authority further said that this stock is in addition to imports, local refinery production demands, rejecting all news surrounding oil crisis and depleting reserves.

The finance minister said that another rumour was being spread regarding widening current account deficit. He maintained that it was under strict watch and being monitored and managed for the national interest.

Dar once again emphasised that people should avoid spreading rumours about the economy and issue statements with responsibility.