Pakistan pays $1bn sukuk bond to end immediate default threat: Bloomberg

Pakistan Friday made the payment for the $1 billion sukuk bond, Bloomberg reported citing the State Bank of Pakistan (SBP) as the country dodged the immediate default threat.

Abid Qamar, a spokesperson at the SBP, told the publication that Pakistan transferred the payment on the sukuk bonds three days before its maturity to Citigroup Inc which will distribute the funds onward to creditors.

According to indicative pricing data compiled by Bloomberg, the notes climbed to 98.9 cents on Friday, marking a nearly 16-cent comeback from a record low of 83 cents in October.

The early payment helped dodge the risk of a near-term default although concerns linger over its ability to pay its long-term debt.

Pakistan needs to repay about $25 billion in the fiscal year 2022-23, though most of it has been rolled over or paid, Ahmad said.

Earlier, during the post-monetary policy briefing, the SBP chief said that funding has been lined up from multilateral and bilateral sources to ensure the repayment would not affect foreign exchange reserves.

It should be noted that Pakistan also received $500 million from the Asian Infrastructure Investment Bank earlier this week, while the Kingdom of Saudia Arabia rolled over the $3 billion deposit with the SBP today.

Commenting on the development, the Ministry of Finance’s former adviser Dr Khaqan Hassan Najeeb said it is indeed comforting to see that Pakistan has made the $1 billion Sukuk payment ahead of time.

“This ends immediate default risk challenge,” he said.

However, the economist added that policymakers should remember that Pakistan continues to face a dollar liquidity crunch and to overcome that staying with the IMF is crucial along with inflows promised by friendly countries, and multilateral and bilateral partners.

Some bold decisions like the conservation of energy, the reappropriation of the Public Sector Development Programme (PSDP), control on expenditures, tight fiscal to complement monetary policy and projects fast-tracking to get dollar inflows are also necessary.